Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
dated as of
October 1, 2007
among
PRINTRONIX, INC.,
PIONEER HOLDING CORP.
and
PIONEER SUB CORP.
TABLE OF CONTENTS
PAGE
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ARTICLE 1 DEFINITIONS.................................................... 1
Section 1.01. Definitions............................................... 1
ARTICLE 2 THE MERGER..................................................... 8
Section 2.01. The Merger................................................ 8
Section 2.02. Conversion of Shares...................................... 8
Section 2.03. Surrender and Payment..................................... 9
Section 2.04. Dissenting Shares......................................... 10
Section 2.05. Stock Options; Restricted Stock........................... 10
Section 2.06. Adjustments............................................... 11
Section 2.07. Withholding Rights........................................ 11
Section 2.08. Lost Certificates......................................... 11
ARTICLE 3 THE SURVIVING CORPORATION...................................... 11
Section 3.01. Certificate of Incorporation.............................. 11
Section 3.02. Bylaws.................................................... 12
Section 3.03. Directors and Officers.................................... 12
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................. 12
Section 4.01. Corporate Existence and Power............................. 12
Section 4.02. Corporate Authorization................................... 12
Section 4.03. Governmental Authorization................................ 13
Section 4.04. Non-contravention......................................... 13
Section 4.05. Capitalization............................................ 13
Section 4.06. Subsidiaries.............................................. 15
Section 4.07. SEC Filings and the Sarbanes-Oxley Act.................... 15
Section 4.08. Financial Statements...................................... 17
Section 4.09. Disclosure Documents...................................... 17
Section 4.10. Absence of Certain Changes................................ 17
Section 4.11. No Undisclosed Material Liabilities....................... 19
Section 4.12. Compliance with Laws; Permits............................. 20
Section 4.13. Litigation................................................ 20
Section 4.14. Finders' Fees; Expenses................................... 20
Section 4.15. Opinion of Financial Advisor.............................. 20
Section 4.16. Taxes..................................................... 21
Section 4.17. Employee Benefit Plans.................................... 22
Section 4.18. Environmental Matters..................................... 25
Section 4.19. Material Contracts........................................ 26
Section 4.20. Insurance Policies........................................ 28
Section 4.21. Intellectual Property..................................... 29
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Section 4.22. Products.................................................. 31
Section 4.23. Properties................................................ 31
Section 4.24. Certain Business Practices................................ 32
Section 4.25. Interested Party Transactions............................. 32
Section 4.26. Antitakeover Statutes and Rights Agreement................ 33
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER
SUBSIDIARY............................................................ 33
Section 5.01. Corporate Existence and Power............................. 33
Section 5.02. Corporate Authorization................................... 33
Section 5.03. Governmental Authorization................................ 34
Section 5.04. Non-contravention......................................... 34
Section 5.05. Absence Of Litigation..................................... 34
Section 5.06. Financing................................................. 34
Section 5.07. Limited Guarantee......................................... 35
Section 5.08. Disclosure Documents...................................... 35
Section 5.09. Antitakeover Statutes..................................... 35
ARTICLE 6 COVENANTS OF THE COMPANY....................................... 35
Section 6.01. Conduct of the Company.................................... 35
Section 6.02. Stockholder Meeting; Proxy Material....................... 38
Section 6.03. No Solicitation; Other Offers............................. 38
Section 6.04. Financing................................................. 40
Section 6.05. Exemption from Liability Under Section 16................. 41
Section 6.06. Stockholder Litigation....................................
ARTICLE 7 COVENANTS OF PARENT............................................ 41
Section 7.01. Obligations of Merger Subsidiary.......................... 41
Section 7.02. Voting of Shares.......................................... 41
Section 7.03. Information For Proxy Statement........................... 41
Section 7.04. Director and Officer Liability............................ 41
Section 7.05. Employee Benefits; 401(k) Plan............................ 43
Section 7.06. Financing Commitments..................................... 43
Section 7.07. Solvency of the Surviving Corporation..................... 43
ARTICLE 8 COVENANTS OF PARENT, MERGER SUBSIDIARY AND THE COMPANY......... 44
Section 8.01. Commercially Reasonable Efforts........................... 44
Section 8.02. Certain Filings........................................... 44
Section 8.03. Public Announcements...................................... 45
Section 8.04. Further Assurances........................................ 45
Section 8.05. Access to Information..................................... 45
Section 8.06. Notices of Certain Events................................. 45
Section 8.07. Delisting................................................. 46
Section 8.08. Litigation................................................ 46
Section 8.09. Environmental Reports..................................... 46
Section 8.10. Working Capital Statements................................ 47
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ARTICLE 9 CONDITIONS TO THE MERGER....................................... 47
Section 9.01. Conditions to the Obligations of Each Party............... 47
Section 9.02. Conditions to the Obligations of Parent and Merger
Subsidiary............................................. 48
Section 9.03. Conditions to the Obligations of the Company.............. 49
ARTICLE 10 TERMINATION................................................... 50
Section 10.01. Termination............................................... 50
Section 10.02. Effect of Termination..................................... 51
ARTICLE 11 MISCELLANEOUS................................................. 51
Section 11.01. Notices................................................... 51
Section 11.02. Survival of Representations and Warranties................ 52
Section 11.03. Amendments and Waivers.................................... 52
Section 11.04. Expenses; Termination Fee................................. 53
Section 11.05. Binding Effect; Benefit; Assignment....................... 54
Section 11.06. Governing Law............................................. 54
Section 11.07. Jurisdiction.............................................. 55
Section 11.08. WAIVER OF JURY TRIAL...................................... 55
Section 11.09. Counterparts; Effectiveness............................... 55
Section 11.10. Entire Agreement.......................................... 55
Section 11.11. Severability.............................................. 55
Section 11.12. Specific Performance...................................... 55
Section 11.13. Interpretation............................................ 56
EXHIBIT
EXHIBIT A - Form of Voting Agreement
EXHIBIT B- Certificate of Incorporation of the Surviving Corporation
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") dated as of October 1, 2007
among Printronix, Inc., a Delaware corporation (the "COMPANY"), Pioneer Holding
Corp., a Delaware corporation ("PARENT"), and Pioneer Sub Corp., a Delaware
corporation and a wholly-owned subsidiary of Parent ("MERGER SUBSIDIARY").
WHEREAS, the respective boards of directors of the Company, Parent and
Merger Sub have approved and adopted this Agreement and the transactions
contemplated hereby and deem them to be advisable and in the best interest of
their respective stockholders;
WHEREAS, the Special Committee of the Company (as defined herein) has
approved this Agreement and the transactions contemplated hereby and deem them
to be advisable and in the best interest of the Company's stockholders;
WHEREAS, immediately prior to the Effective Time, certain member of the
Company's management (the "CONTINUING STOCKHOLDERS") will contribute shares of
the Company's common stock owned by them (the "CONTRIBUTED STOCK") to Parent in
exchange for shares of capital stock of Parent;
WHEREAS, concurrently with the execution and delivery of this Agreement,
each of the directors, in their capacity as stockholders, and executive officers
of the Company have entered into voting agreements in the form attached as
Exhibit A hereto (the "VOTING AGREEMENTS"); and
WHEREAS, concurrently with the execution of this Agreement, and as a
condition to the willingness of the Company to enter into this Agreement, Vector
Capital Partners IV, L.P. (the "GUARANTOR") has entered into a limited guarantee
(the "LIMITED GUARANTEE") in the form of Annex A hereto in favor of the Company
pursuant to which Guarantor has, among other matters, and subject to the terms
thereof, guaranteed certain obligations of Parent and Merger Sub in connection
with this Agreement.
NOW, THEREFORE, in consideration of the representations, warranties and
covenants in this Agreement, and intending to be legally bound hereby, Parent,
the Company and Merger Sub hereby agree as follows:
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.01. Definitions. (a) As used herein, the following terms have the
following meanings:
"ACQUISITION PROPOSAL" means, other than the transactions contemplated by
this Agreement, any offer, proposal or inquiry from a Third Party relating to,
or that could reasonably be expected to lead to, or any Third Party indication
of interest in, (A) any acquisition or purchase, direct or indirect, in one or a
series of transactions, of assets or businesses that constitute 15% or more of
the consolidated revenue, net income, EBITDA or assets of the Company and its
Subsidiaries or over 15% of any class of equity or voting securities of the
Company or any of its Subsidiaries whose assets, individually or in the
aggregate, constitute more than 15% of the consolidated revenue, net
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income, EBITDA or assets of the Company and its Subsidiaries, (B) any tender
offer (including a self-tender offer) or exchange offer that, if consummated,
would result in a Third Party beneficially owning 15% or more of any class of
equity or voting securities of the Company or any of its Subsidiaries whose
assets, individually or in the aggregate, constitute more than 15% of the
consolidated revenue, net income, EBITDA or assets of the Company and its
Subsidiaries, or (C) a merger, consolidation, share exchange, business
combination, sale of substantially all the assets, reorganization,
recapitalization, liquidation, dissolution, joint venture, license agreement or
other similar transaction involving the Company or any of its Subsidiaries whose
assets, individually or in the aggregate, constitute more than 15% of the
consolidated revenue, net income, EBITDA or assets of the Company and its
Subsidiaries.
"AFFILIATE" means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with such Person.
"APPLICABLE LAW" means, with respect to any Person, any civil and criminal,
foreign, international, European Union, provincial, federal, state or local law
(statutory, common or otherwise), constitution, treaty, convention, ordinance,
code, rule, regulation, order, injunction, judgment, decree, ruling, writ or
other similar requirement enacted, adopted, promulgated or applied by a
Governmental Authority that is binding upon or applicable to such Person, as
amended unless expressly specified otherwise.
"BUSINESS DAY" means a day, other than Saturday, Sunday or other day on
which commercial banks in New York, New York or San Francisco, California are
authorized or required by Applicable Law to close.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY BALANCE SHEET" means the consolidated balance sheet of the Company
as of June 29, 2007 and the footnotes thereto set forth in the Company 10-Q.
"COMPANY BALANCE SHEET DATE" means June 29, 2007.
"COMPANY DISCLOSURE SCHEDULE" means the disclosure schedule dated the date
hereof regarding this Agreement that has been provided by the Company to Parent
and Merger Subsidiary.
"COMPANY IP" means all Intellectual Property Rights used in the conduct of
the Company's or its Subsidiaries' businesses as currently conducted, or as
currently contemplated to be conducted.
"COMPANY OWNED IP" means all Intellectual Property Rights owned, purported
to be owed, developed or acquired by assignment, or exclusively licensed, by the
Company and/or its Subsidiaries.
"COMPANY RIGHTS" means the Company Stock purchase rights issued pursuant to
the Company Rights Agreement.
"COMPANY RIGHTS AGREEMENT" means the Company's Amended and Restated Rights
Agreement dated as of April 4, 1999.
"COMPANY STOCK" means the common stock, $0.01 par value, of the Company.
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"COMPANY 10-K" means the Company's annual report on Form 10-K for the
fiscal year ended March 31, 2007.
"COMPANY 10-Q" means the Company's quarterly report on Form 10-Q for the
quarterly period ended June 29, 2007.
"COMPANY TRANSACTION COSTS" means all fees and expenses incurred by the
Company and its Subsidiaries in connection with the transactions contemplated by
this Agreement, including without limitation amounts payable to Houlihan Lokey
Howard & Zukin Capital, Inc. and Houlihan Lokey Howard & Zukin Financial
Advisors, Inc., amounts payable to the Company's outside counsel, accountants
and other advisors and service providers, and amounts payable to printers in
connection with the preparation, printing and mailing of the Company Proxy
Statement.
"CONTRACT" means any legally binding written or oral contract, agreement,
note, bond, indenture, mortgage, guarantee, option, lease, license, sales or
purchase order, warranty, commitment or other instrument of any kind.
"CURRENT ASSETS" shall have the same meaning as provided for in the Company
10-K, which includes cash and cash equivalents, short-term investments, accounts
receivable net of allowances for doubtful accounts and sales returns, inventory,
prepaid expenses and other current assets, and net deferred income tax assets.
"CURRENT LIABILITIES" shall have the same meaning as provided for in the
Company 10-K, which includes current portion of long-term debt, accounts
payable, accrued liabilities, payroll and employee benefits, warranties,
deferred revenue, professional fees, income taxes, and other liabilities. For
the purposes of this Agreement, Current Liabilities shall exclude the Company
Transaction Costs.
"CURRENT SITES" shall mean the Company's current manufacturing facilities
in California, the Netherlands, Mexico and Singapore.
"DELAWARE LAW" means the General Corporation Law of the State of Delaware.
"ENVIRONMENTAL CONSULTANTS" shall mean (a) for all Current Sites other than
California, ENVIRON International Corporation and (b) for the current California
Company manufacturing facility, the technical consultant retained by the
Potential Mortgage Lender.
"ENVIRONMENTAL LAWS" means all civil and criminal, foreign, international,
European Union, provincial, federal, state and local laws (statutory, common or
otherwise), constitutions, treaties, conventions, ordinances, codes, rules,
regulations, orders, injunctions, judgments, decrees, rulings, writs or other
similar requirements, in effect where business of the Company or its
Subsidiaries currently is conducted any of which govern or relate to pollution,
protection or restoration of the environment, natural resources, safety and
health, releases or threatened releases of Hazardous Substances, solid or
hazardous waste, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, release, transport or handling of
Hazardous Substances and all laws and regulations with regard to record keeping,
notification, disclosure and reporting requirements respecting Hazardous
Substances, together with any Governmental Authority interpretations of each of
the foregoing, including, but not limited to (i) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. Section 9601 et
seq., and any
3
amendments thereto; (ii) the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901 et seq., and any amendments thereto; (iii) the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801 et seq.; (iv) any other similar Laws,
as now in effect, relating to, or imposing liability or standards of conduct
concerning, any Hazardous Materials or dangerous waste, substance or material;
and (v) any Laws relating to the protection of human health and occupational
safety for employees and others in the workplace.
"ENVIRONMENTAL PERMITS" means all Permits relating to or required by
Environmental Laws and affecting, or relating to, the business of the Company or
any Subsidiary as currently conducted.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"ERISA AFFILIATE" of any entity means any other entity that, together with
such entity, would be treated as a single employer under Section 414 of the
Code.
"FREELY AVAILABLE CASH" shall mean unrestricted cash on hand of the Company
held in the account set forth on Schedule A less the Company Transaction Costs.
"Freely Available Cash" shall exclude any cash that cannot be deposited with the
Exchange Agent pursuant to Section 2.03 under Applicable Law (including laws
relating to solvency, adequate surplus and similar capital adequacy tests) or
under any Contract binding upon the Company or any of its Subsidiaries or any
Permits affecting, or relating in any way to, the assets or business of the
Company and its Subsidiaries.
"GAAP" means generally accepted accounting principles in the United States.
"GOVERNMENTAL AUTHORITY" means any transnational, domestic or foreign
federal, state or local, governmental authority, department, court, agency or
official, including any political subdivision thereof.
"HAZARDOUS SUBSTANCE" means any pollutant, contaminant, waste or chemical
or any toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous
substance, waste or material, or any substance, waste or material having any
constituent elements displaying any of the foregoing characteristics, including
any substance, waste or material regulated under any Applicable Law.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"INTELLECTUAL PROPERTY RIGHTS" means all worldwide rights in (i)
inventions, whether or not patentable, (ii) patents and patent applications,
(iii) trademarks, service marks, trade dress, logos, Internet domain names and
trade names, whether or not registered, and all goodwill associated therewith,
(iv) rights of publicity and other rights to use the names and likeness of
individuals, (v) mask works, (vi) computer software, data, databases, files, and
documentation and other materials related to the foregoing, (vii) trade secrets
and confidential, technical and business information, (viii) any other similar
type of proprietary intellectual property right, (ix) all rights to any of the
foregoing provided by bilateral or international treaties or conventions, (x)
all other intellectual property or proprietary rights and (xi) all rights to sue
or recover and retain damages and costs and attorneys' fees for past, present
and future infringement or misappropriation of any of the foregoing.
"KNOWLEDGE" of any Person that is not an individual means the actual
knowledge of such Person's executive officers after reasonable inquiry.
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"LIEN" means, with respect to any property or asset, any mortgage, lien,
pledge, charge, security interest, encumbrance or other adverse claim of any
kind in respect of such property or asset. For purposes of this Agreement, a
Person shall be deemed to own subject to a Lien any property or asset that it
has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such property or asset.
"MATERIAL ADVERSE EFFECT" means, with respect to any Person (other than
Parent and Merger Subsidiary), any state of facts, change, development, event,
effect, condition, occurrence, action or omission that, individually or in the
aggregate, could reasonably be expected to result in a material adverse effect
on (i) the condition (financial or otherwise), business, assets, properties or
results of operations of such Person and its Subsidiaries, taken as a whole, or
(ii) the ability of such Person to perform its obligations under or to
consummate the transactions contemplated by this Agreement, except, in the case
of clause (i), any effect resulting from or arising in connection with (A) this
announcement or pendency of this Agreement or the transactions contemplated
hereby, (B) changes, circumstances or conditions affecting the industry in which
the Company and its Subsidiaries operate, to the extent they do not
disproportionately affect the Company or its Subsidiaries, taken as a whole, (C)
any change in the Company's stock price or trading volume, in and of itself (it
being understood that the underlying cause of any such change may be taken into
consideration in determining whether a Material Adverse Effect has occurred or
could reasonably be expected to occur), (D) any failure by the Company to meet
internal or third party published revenue or earnings projections, in and of
itself (it being understood that the underlying cause of any such failure may be
taken into consideration in determining whether a Material Adverse Effect has
occurred or could reasonably be expected to occur), (E) changes in general U.S.
or global economic, regulatory or political conditions, to the extent they do
not disproportionately affect the Company or its Subsidiaries, taken as a whole,
(F) any changes or effects arising out of or resulting from any legal claims or
other proceedings made by any of the Company's stockholders arising out of or
related to this Agreement, the Merger or any other transaction contemplated
hereby, or (G) potential costs of remediation, claims, violations, damages,
losses or diminutions of property value identified and quantified in the
Environmental Reports with respect to the Current Sites.
"1933 ACT" means the Securities Act of 1933.
"1934 ACT" means the Securities Exchange Act of 1934.
"PARENT MATERIAL ADVERSE EFFECT" means, with respect to the Parent, any
state of facts, change, development, event, effect, condition, occurrence,
action or omission that, individually or in the aggregate, could reasonably be
expected to result in a material adverse effect on the ability of Parent to
perform its obligations under or to consummate the transactions contemplated by
this Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERMIT" means any permit, license, franchise, certificate, consent,
approval and other similar authorization of any Governmental Authority.
"PERSON" means an individual, corporation, partnership, limited liability
company, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
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"POTENTIAL MORTGAGE LENDER" shall mean Wells Fargo or any other bank that
may provide mortgage financing to Parent.
"PUBLIC SOFTWARE" means any software that contains, or is derived in any
manner (in whole or in part) from, any software that is distributed as free
software or open source software (e.g., Linux), including software licensed or
distributed under any of the following licenses or distribution models: (A)
GNU's General Public License (GPL) or Lesser/Library GPL (LGPL), (B) the
Artistic License (e.g., PERL), (C) the Mozilla Public License, (D) the Netscape
Public License, (E) the Sun Community Source License (SCSL), (F) the Sun
Industry Standards License (SISL), (G) the BSD License, and (H) the Apache
License.
"REGISTERED IP" means all U.S., international and foreign (i) patents and
patent applications (including provisional applications and design patents and
applications) and all reissues, divisions, divisionals, renewals, extensions,
counterparts, continuations and continuations-in-part thereof, and all patents,
applications, documents and filings claiming priority thereto or serving as a
basis for priority thereof, (ii) registered trademarks, service marks,
applications to register trademarks, applications to register service marks,
intent-to-use applications, or other registrations or applications related to
trademarks, (iii) registered copyrights and applications for copyright
registration, (iv) domain name registrations and Internet number assignments;
and (v) other Intellectual Property Rights that are the subject of an
application, certificate, filing, registration or other document issued, filed
with, or recorded by any Governmental Authority, in the case of each of clauses
(i)-(v) above, owned by, under obligation of assignment to, or filed in the name
of, the Company or any of its Subsidiaries.
"SARBANES-OXLEY ACT" means the Sarbanes-Oxley Act of 2002.
"SEC" means the Securities and Exchange Commission.
"SUBSIDIARY" means, with respect to any Person, any entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
are at any time directly or indirectly owned by such Person.
"THIRD PARTY" means any Person, including as defined in Section 13(d) of
the 1934 Act, other than Parent or any of its Affiliates.
"WORKING CAPITAL" means Current Assets less Current Liabilities.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
TERM SECTION
- ---- --------
1994 Plan 4.05
2005 Plan 4.05
Additional Report Notice 8.09
Adverse Recommendation Change 6.03
Agreement Preamble
Certificates 2.03
Company Preamble
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TERM SECTION
- ---- --------
Company Board Recommendation 4.02
Company Cash Deposit 2.03
Company Payment Event 11.04
Company Proxy Materials 4.09
Company Proxy Statement 4.09
Company SEC Documents 4.07
Company Securities 4.05
Company Stockholder Approval 4.02
Company Stockholder Meeting 6.02
Company Stock Option 2.05
Company Stock Option Plans 4.05
Company Subsidiary Securities 4.06
Confidentiality Agreement 6.03
Continuing Stockholders Preamble
Contributed Stock Preamble
Current Sites 8.09
Debt Commitment Letter 5.06
Debt Financing 5.06
Effective Time 2.01
Employee Plans 4.17
End Date 10.01
Environmental Reports 8.09
Equity Commitment Letter 5.06
Exchange Agent 2.03
FASB 6.01
Financing 5.06
Financing Commitments 5.06
Guarantor Recitals
Indebtedness 4.05
Indemnified Person 7.04
internal controls 4.07
Leased Real Property 4.23
Limited Guarantee Recitals
Major Supplier 4.19
Major Supplier 4.19
Material Contract 4.19
Merger 2.01
Merger Consideration 2.02
Merger Subsidiary Preamble
Multiemployer Plan 4.17
Necessary IP Rights 4.21
New Financing Commitments 7.06
Notice Date 8.09
Owned Real Property 4.23
Parent Preamble
Parent Environmental Termination Notice 8.09
Parent Parties 11.04(d)
Parent Payment Event 11.04
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TERM SECTION
- ---- --------
Parent Termination Fee 11.04
Phase I Environmental Site Assessment 8.09
Proceedings 4.13
Qualified Plan 4.17
Significant Environmental Matter 8.09
Special Committee 4.02
Solvency Opinion 7.12
Superior Proposal 6.03
Surviving Corporation 2.01
Tax 4.16
Taxing Authority 4.16
Tax Return 4.16
Tax Sharing Agreements 4.16
Uncertificated Shares 2.03
Voting Agreements Recitals
ARTICLE 2
THE MERGER
Section 2.01. The Merger. (a) Subject to the terms and conditions of this
Agreement, at the Effective Time, Merger Subsidiary shall be merged (the
"MERGER") with and into the Company in accordance with Delaware Law, whereupon
the separate existence of Merger Subsidiary shall cease, and the Company shall
be the surviving corporation (the "SURVIVING CORPORATION").
(b) As soon as practicable, but in no event later than three (3)
Business Days following the satisfaction or, to the extent permitted hereunder,
waiver of all conditions to the Merger set forth in Article 9 (other than
delivery of items to be delivered at the Closing and other than satisfaction of
those conditions that by their nature are to be satisfied at the Closing, it
being understood that the occurrence of the Closing shall remain subject to the
delivery of such items and the satisfaction or waiver of such conditions at the
Closing), the Company and Merger Subsidiary shall file a certificate of merger
with the Delaware Secretary of State and make all other filings or recordings
required by Delaware Law in connection with the Merger. The Merger shall become
effective at such time (the "EFFECTIVE TIME") as the certificate of merger is
duly filed with the Delaware Secretary of State (or at such later time as may be
specified in the certificate of merger). The closing of the Merger shall take
place at 11:00 a.m. on the date of the Effective Time at the offices of
O'Melveny & Myers LLP, 275 Battery Street, Suite 2600, San Francisco, California
94111, unless another time, date and/or place is agreed to in writing by Merger
Subsidiary and the Company.
(c) From and after the Effective Time, the Surviving Corporation shall
possess all the rights, powers, privileges and franchises and be subject to all
of the obligations, liabilities, restrictions and disabilities of the Company
and Merger Subsidiary, all as provided under Delaware Law.
Section 2.02. Conversion of Shares. At the Effective Time, by virtue of the
Merger and without any action on the part of any Person,
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(a) except as otherwise provided in Section 2.02(b), Section 2.02(c)
or Section 2.04, each share of Company Stock (including the associated Company
Rights) outstanding immediately prior to the Effective Time shall be shall be
converted into the right to receive an amount in cash per share, without
interest, equal to $16.00 (the "MERGER CONSIDERATION");
(b) each share of Company Stock held by the Company as treasury stock
or owned by Parent (including the Contributed Stock) or Merger Subsidiary
immediately prior to the Effective Time shall be cancelled, and retired without
payment of any consideration therefor;
(c) each share of Company Stock held by any Subsidiary of the Company
immediately prior to the Effective Time shall be converted into such number of
shares of stock of the Surviving Corporation such that each such Subsidiary owns
the same percentage of the Surviving Corporation immediately following the
Effective Time as such Subsidiary owned in the Company immediately prior to the
Effective Time; and
(d) each share of common stock of Merger Subsidiary outstanding
immediately prior to the Effective Time shall be converted into and become one
share of common stock of the Surviving Corporation with the same rights, powers
and privileges as the shares so converted and shall constitute the only
outstanding shares of capital stock of the Surviving Corporation.
Section 2.03. Surrender and Payment. (a) Prior to the Effective Time,
Parent shall appoint an agent (the "EXCHANGE AGENT") reasonably satisfactory to
the Company for the purpose of exchanging for the Merger Consideration (i)
certificates representing shares of Company Stock (the "CERTIFICATES") or (ii)
uncertificated shares of Company Stock (the "UNCERTIFICATED SHARES").
Immediately prior to the Effective Time, the Company shall deposit $18 million
in cash (the "COMPANY CASH DEPOSIT") with the Exchange Agent. The Company Cash
Deposit shall be made solely out of Freely Available Cash and shall be used
solely for purposes of paying a portion of the Merger Consideration in
accordance with this Article 2 and shall not be used to satisfy any other
obligation of the Company or any of its Subsidiaries. At or immediately
following the Effective Time, Parent shall make available to the Exchange Agent
cash, for the benefit of the holders of Certificates and Uncertificated Shares,
in an amount sufficient to pay all remaining aggregate Merger Consideration in
excess of the Company Cash Deposit. Promptly after the Effective Time (but,
subject to receipt by the Exchange Agent of the necessary stockholder records
from the Company's transfer agent, in no event more than ten (10) Business Days
after the Effective Time), Parent shall send, or shall cause the Exchange Agent
to send, to each holder of shares of Company Stock at the Effective Time a
letter of transmittal and instructions (which shall specify that the delivery
shall be effected, and risk of loss and title shall pass, only upon proper
delivery of the Certificates or transfer of the Uncertificated Shares to the
Exchange Agent) for use in such exchange. The parties hereby acknowledge and
agree that the ten (10)-Business Day period set forth in the previous sentence
will be tolled for each Business Day the Exchange Agent has not received the
necessary stockholder records from the Company's transfer agent.
(b) Each holder of shares of Company Stock that have been converted into
the right to receive the Merger Consideration shall be entitled to receive, upon
(i) surrender to the Exchange Agent of a Certificate, together with a properly
completed letter of transmittal, or (ii) receipt of an "agent's message" by the
Exchange Agent (or such other evidence, if any, of transfer as the Exchange
Agent may reasonably request) in the case of a book-entry transfer of
Uncertificated Shares, together with a properly completed letter of transmittal,
the Merger Consideration in respect of the Company Stock represented by a
Certificate or Uncertificated Share.
9
Until so surrendered or transferred, as the case may be, each such Certificate
or Uncertificated Share shall represent after the Effective Time for all
purposes only the right to receive such Merger Consideration.
(c) If any portion of the Merger Consideration is to be paid to a
Person other than the Person in whose name the surrendered Certificate or the
transferred Uncertificated Share is registered, it shall be a condition to such
payment that (i) either such Certificate shall be properly endorsed or shall
otherwise be in proper form for transfer or such Uncertificated Share shall be
properly transferred and (ii) the Person requesting such payment shall pay to
the Exchange Agent any transfer or other taxes required as a result of such
payment to a Person other than the registered holder of such Certificate or
Uncertificated Share or establish to the satisfaction of the Exchange Agent that
such tax has been paid or is not payable.
(d) After the Effective Time, there shall be no further registration
of transfers of shares of Company Stock. If, after the Effective Time,
Certificates or Uncertificated Shares are presented to the Surviving
Corporation, they shall be canceled and exchanged for the Merger Consideration
provided for, and in accordance with the procedures set forth, in this Article
2.
(e) Any portion of the Merger Consideration made available to the
Exchange Agent pursuant to Section 2.03(a) that remains unclaimed by the holders
of shares of Company Stock nine (9) months after the Effective Time shall be
returned to the Surviving Corporation, upon demand, and any such holder who has
not exchanged shares of Company Stock for the Merger Consideration in accordance
with this Section 2.03 prior to that time shall thereafter look only to the
Surviving Corporation for payment of the Merger Considerations in respect of
such shares without any interest thereon. Notwithstanding the foregoing, neither
Parent, the Surviving Corporation or the Exchange Agent shall be liable to any
holder of shares of Company Stock for any amounts paid to a public official
pursuant to applicable abandoned property, escheat or similar laws.
(f) Any portion of the Merger Consideration made available to the
Exchange Agent pursuant to Section 2.03(a) to pay for shares of Company Stock
for which appraisal rights have been perfected shall be returned to the
Surviving Corporation upon demand.
Section 2.04. Dissenting Shares. Notwithstanding Section 2.03, shares of
Company Stock outstanding immediately prior to the Effective Time and held by a
holder who has not voted in favor of the Merger or consented thereto in writing
and who has demanded appraisal for such shares of Company Stock in accordance
with Delaware Law shall not be converted into a right to receive the Merger
Consideration, unless such holder fails to perfect, withdraws or otherwise loses
the right to appraisal. If, after the Effective Time, such holder fails to
perfect, withdraws or loses the right to appraisal, such shares of Company Stock
shall be treated as if they had been converted as of the Effective Time into a
right to receive the Merger Consideration. The Company shall give Parent prompt
notice of any demands received by the Company for appraisal of shares of Company
Stock, and Parent shall have the right to direct all negotiations and
proceedings with respect to such demands. Except with the prior written consent
of Parent, the Company shall not make any payment with respect to, or offer to
settle or settle, any such demands.
Section 2.05. Stock Options; Restricted Stock. (a) At or immediately prior
to the Effective Time, each option to purchase shares of Company Stock
outstanding under any employee stock option or compensation plan or arrangement
of the Company (a "COMPANY STOCK OPTION"), whether or not vested or exercisable,
shall be canceled, and the Company shall pay each holder of
10
any such option at or promptly after the Effective Time for each such option,
subject to applicable withholding requirements, an amount in cash determined by
multiplying (i) the excess, if any, of the Merger Consideration in cash per
share over the applicable exercise price of such option by (ii) the number of
shares of Company Stock such holder could have purchased (assuming full vesting
of all options) had such holder exercised such option in full immediately prior
to the Effective Time.
(b) Prior to the Effective Time, the Company shall take such actions
as may be necessary to give effect to the transactions contemplated by this
Section 2.05.
(c) Immediately prior to the Effective Time, each share of restricted
Company Stock that is outstanding shall become fully vested and not subject to
any rights of repurchase or forfeiture provisions, and the holders of such
outstanding restricted stock awards shall be treated as Persons holding shares
of the Common Stock of the Company under this Agreement.
Section 2.06. Adjustments. If, during the period between the date of this
Agreement and the Effective Time, there is any reclassification,
recapitalization, stock split or combination, exchange or readjustment of
shares, or any stock dividend thereon with a record date during such period
relating to the Company Stock, but excluding any change that results from any
exercise of options to purchase shares of Company Stock granted under the
Company's stock option or compensation plans or arrangements, the Merger
Consideration and any other amounts payable pursuant to this Agreement shall be
appropriately adjusted.
Section 2.07. Withholding Rights. Each of the Surviving Corporation, Parent
and any other Person required to withhold with respect to any payment made under
this Agreement shall be entitled to deduct and withhold from the consideration
otherwise payable to any Person pursuant to this Article 2 such amounts as it is
required to deduct and withhold with respect to the making of such payment under
any provision of federal, state, local or foreign tax law. If the Surviving
Corporation or Parent, as the case may be, so withholds amounts that it is
required to withhold and properly remit such amounts to the appropriate Tax
Authority, such amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the shares of Company Stock in respect of
which the Surviving Corporation or Parent, as the case may be, made such
deduction and withholding.
Section 2.08. Lost Certificates. If any Certificate shall have been lost,
stolen, defaced or destroyed, upon the making of an affidavit of that fact by
the Person claiming such Certificate to be lost, stolen, defaced or destroyed
and the posting by such Person of a bond in such amount as the Surviving
Corporation may direct as indemnity against any claim that may be made against
it with respect to such Certificate, the Exchange Agent will pay, in exchange
for such lost, stolen or destroyed Certificate, the Merger Consideration to be
paid in respect of the shares of Company Stock represented by such Certificate,
as contemplated by this Article 2.
ARTICLE 3
THE SURVIVING CORPORATION
Section 3.01. Certificate of Incorporation. The certificate of
incorporation of the Surviving Corporation shall be as set forth on Exhibit B
hereto until amended in accordance with Applicable Law.
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Section 3.02. Bylaws. The bylaws of Merger Subsidiary in effect at the
Effective Time shall be the bylaws of the Surviving Corporation until amended in
accordance with Applicable Law.
Section 3.03. Directors and Officers. From and after the Effective Time,
until successors are duly elected or appointed and qualified in accordance with
Applicable Law, (i) the directors of Merger Subsidiary at the Effective Time
shall be the directors of the Surviving Corporation, and (ii) the officers of
Merger Subsidiary at the Effective Time shall be the officers of the Surviving
Corporation.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Subject to such exceptions disclosed in the Company Disclosure Schedule (it
being expressly understood and agreed that the disclosure of any fact or item in
any Section of the Company Disclosure Schedule shall only be deemed to be an
exception to (or, as applicable, a disclosure for purposes of) (i) the
representations and warranties of the Company that are contained in the
corresponding Section of this Agreement and (ii) any other representations and
warranties of such Company that is contained in this Agreement, but only if the
relevance of that reference as an exception to (or a disclosure for purposes of)
such representations and warranties is readily apparent to a reasonable person
who has read that reference and such representations and warranties, without any
independent knowledge on the part of the reader regarding the matter(s) so
disclosed, the Company represents and warrants to Parent that:
Section 4.01. Corporate Existence and Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and has all corporate powers and all material Permits required
to carry on its business as now conducted. The Company is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where such qualification is necessary, except for those jurisdictions where
failure to be so qualified would not have, individually or in the aggregate, a
Material Adverse Effect on the Company. The Company has heretofore delivered to
Parent true and complete copies of the certificate of incorporation and bylaws
of the Company and each of its Subsidiaries as currently in effect. The Company
has heretofore delivered to Parent true and complete copies of the minutes (or,
in the case of draft minutes, the most recent versions thereof) of the meetings
of the stockholders, the Board of Directors and any committees of the Board of
Directors of the Company and each of its Subsidiaries since January 1, 2005.
Section 4.02. Corporate Authorization. (a) The execution, delivery and
performance by the Company of this Agreement and the consummation by the Company
of the transactions contemplated hereby are within the Company's corporate
powers and, except for the required approval of the Company's stockholders in
connection with the consummation of the Merger, have been duly authorized by all
necessary corporate action on the part of the Company. The affirmative vote of
the holders of a majority of the outstanding shares of Company Stock is the only
vote of the holders of any of the Company's capital stock necessary in
connection with the consummation of the Merger (the "COMPANY STOCKHOLDER
APPROVAL"). This Agreement constitutes a valid and binding agreement of the
Company enforceable against the Company in accordance with its terms, except to
the extent that enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance or similar laws or by general principles of
equity.
12
(b) At a meeting duly called and held, the Company's Board of
Directors, acting upon the favorable recommendation of a special committee of
the Board of Directors, which is comprised entirely of disinterested,
independent directors (the "SPECIAL COMMITTEE"), has unanimously (i) determined
that this Agreement and the transactions contemplated hereby are fair to and in
the best interests of the Company's stockholders (other than the Continuing
Stockholders and their Affiliates), (ii) declared this Agreement and the
transactions contemplated hereby advisable, (iii) approved and adopted this
Agreement and the transactions contemplated hereby, (iv) resolved (subject to
Section 6.03) to recommend adoption of this Agreement by its stockholders (such
recommendation, the "COMPANY BOARD RECOMMENDATION"), and (v) taken all action
necessary to render inapplicable to this Agreement, the Merger, the Voting
Agreements and the other transactions contemplated hereby and thereby the
restrictions on "business combinations" (as defined in Section 203 of Delaware
Law) set forth in Section 203 of Delaware Law.
Section 4.03. Governmental Authorization. The execution, delivery and
performance by the Company of this Agreement and the consummation by the Company
of the transactions contemplated hereby require no action by or in respect of,
or filing with, any Governmental Authority other than (i) the filing of a
certificate of merger with respect to the Merger with the Delaware Secretary of
State and appropriate documents with the relevant authorities of other states in
which the Company is qualified to do business, (ii) compliance with any
applicable requirements of the HSR Act and of laws analogous to the HSR Act
existing in foreign jurisdictions, (iii) compliance with any applicable
requirements of the 1934 Act, and any other applicable U.S. state or federal
securities laws, and (iv) any actions or filings the absence of which would not
be reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company.
Section 4.04. Non-contravention. Except as set forth in Section 4.04 of the
Company Disclosure Schedule, the execution, delivery and performance by the
Company of this Agreement and the consummation of the transactions contemplated
hereby do not and will not (i) require any consent or other action by any Person
under, contravene, conflict with, violate, breach or constitute a default under,
or an event that, with or without notice or lapse of time or both, would
constitute a violation, breach or default under, or cause or permit the
termination, cancellation, acceleration or other change of any right or
obligation or the loss of any benefit to which the Company or any of its
Subsidiaries is entitled under (A) any provision of the certificate of
incorporation or bylaws of the Company or similar organizational documents of
any of its Subsidiaries, (B) assuming compliance with the matters referred to in
Section 4.03, any provision of any Applicable Law, (C) any provision of any
agreement or other instrument binding upon the Company or any of its
Subsidiaries or any Permit affecting, or relating in any way to, the assets or
business of the Company and its Subsidiaries or (ii) result in the creation or
imposition of any Lien on any asset of the Company or any of its Subsidiaries,
with such exceptions, in the case of each of clauses (i)(B), (i)(C) and (ii), as
would not be reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company.
Section 4.05. Capitalization. (a) The authorized capital stock of the
Company consists of 30,000,000 shares of Company Stock. As of the date of this
Agreement, there were outstanding 6,675,457 shares of Company Stock (of which
284,400 are shares of Restricted Stock), Company Stock Options to purchase an
aggregate of 314,975 shares of Company Stock under the Company's 1994 Stock
Incentive Plan (the "1994 PLAN") (of which options to purchase an aggregate of
all such shares of Company Stock were exercisable), Company Stock Options to
purchase an aggregate of 7,500 shares of Company Stock under the Company's 2005
Stock Option Plan (the "2005 PLAN" and, together with the 1994 Plan, the
"COMPANY STOCK PLANS") (of which options to purchase an
13
aggregate of all such shares of Company Stock were exercisable) and no options
to purchase Company Stock granted outside the Company Stock Plans. The Company
has no shares of Company Stock reserved for future issuance under the 1994 Plan
and 591,500 shares of Company Stock reserved for future issuance under the 2005
Plan. All outstanding shares of capital stock of the Company have been, and all
shares that may be issued pursuant to the Company Stock Plans will be, when
issued in accordance with the respective terms thereof, duly authorized and
validly issued and are fully paid and nonassessable and free of preemptive
rights. Except as set forth on Section 4.05(a)(i) of the Company Disclosure
Schedule, no Company Subsidiary or Affiliate owns any shares of capital stock of
the Company. Section 4.05(a)(ii) of the Company Disclosure Schedule contains a
complete and correct list of each outstanding Company Stock Option, including
the holder, date of grant, exercise price, expiration date, number of shares of
Company Stock subject thereto and an indication of whether the holder is an
employee of the Company. The Company has provided to Parent copies of the forms
of all grant agreements pursuant to which any Company Stock Option was granted.
Section 4.05(a)(iii) of the Company Disclosure Schedule contains a complete and
correct list of each outstanding share of Restricted Stock, including the
holder, date of grant, vesting schedule and number of shares of Restricted
Stock. The Company has provided to Parent copies of the forms of all grant
agreements pursuant to which any Restricted Stock was issued. All Company Stock
Options and shares of Restricted Stock may, by their terms, be treated in
accordance with 2.05. All Company Stock Options and any other Company
Securities, in each case whether currently outstanding or previously issued
under the Company Stock Plans or any similar equity plan previously in
existence, were granted with an exercise price or strike price not less than the
fair market value of the Company Stock on the grant date and were granted in
material compliance with the applicable equity plan and the rule of the Nasdaq
Global Market or other securities exchange on the Company Common Stock was
traded on the grant date.
(b) Except as set forth in this Section 4.05, there are no outstanding
(i) shares of capital stock or voting securities of the Company, (ii) securities
of the Company convertible into or exchangeable or exercisable for shares of
capital stock or voting securities of the Company, (iii) options or other rights
to acquire from the Company, or other obligation of the Company to issue, any
capital stock, voting securities or securities convertible into or exchangeable
for capital stock or voting securities of the Company or (iv) restricted shares,
restricted share units, stock appreciation rights, performance shares,
contingent value rights, "phantom" stock or similar securities or rights that
are derivative of, or provide economic benefits based, directly or indirectly,
on the value or price of, any capital stock of, or other voting securities or
ownership interests in, the Company (the items in clauses (i)-(iv) being
referred to collectively as the "Company Securities"). There are no outstanding
obligations of the Company or any of its Subsidiaries to issue, deliver, sell,
repurchase, redeem or otherwise acquire any of the Company Securities. Neither
the Company nor any of its Subsidiaries is a party to any voting agreements with
respect to any Company Securities and, to the knowledge of the Company, as of
the date of this Agreement (other than pursuant to the Voting Agreements) there
are no irrevocable proxies and no voting agreements with respect to any Company
Securities.
(c) Except as set forth in Section 4.05(c) of the Company Disclosure
Schedule, no Company Securities are owned by any Subsidiary of the Company.
(d) Except as set forth in Section 4.05(d) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries has any (A)
indebtedness for borrowed money, (B) indebtedness evidenced by any bond,
debenture, note, mortgage, indenture or other debt instrument or debt security,
(C) accounts payable to trade creditors and accrued expenses not arising
14
in the ordinary course of business, (D) amounts owing as deferred purchase price
for the purchase of any property, (E) capital leases or (F) guarantees with
respect to any indebtedness or obligation of a type described in clauses (A)
through (E) above of any other person (collectively, "INDEBTEDNESS"). There are
no bonds, debentures, notes or other Indebtedness of the Company or any of its
Subsidiaries or any other securities (other than shares of Company Stock),
instruments or obligations of the Company or any of its Subsidiaries, in each
case, which has or which by its terms may have at any time (whether actual or
contingent) the right to vote (or which is convertible into, or exchangeable
for, securities having the right to vote) on any matters on which stockholders
of the Company or any of its Subsidiaries may vote.
Section 4.06. Subsidiaries. (a) Each Subsidiary of the Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation, has all corporate powers and all
material Permits required to carry on its business as now conducted. Each such
Subsidiary is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction where such qualification is necessary, except
for those jurisdictions where failure to be so qualified would not have,
individually or in the aggregate, a Material Adverse Effect on the Company. All
material Subsidiaries of the Company and their respective jurisdictions of
incorporation are identified in Section 4.06(a) of the Company Disclosure
Schedule.
(b) Except as set forth in Section 4.06(b) of the Company Disclosure
Schedule, all of the outstanding capital stock of, or other voting securities or
ownership interests in, each Subsidiary of the Company, is owned by the Company,
directly or indirectly, free and clear of any Lien and free of any other
limitation or restriction (including any restriction on the right to vote, sell
or otherwise dispose of such capital stock or other voting securities or
ownership interests). There are no outstanding (i) securities of the Company or
any of its Subsidiaries convertible into or exchangeable or exercisable for
shares of capital stock or other voting securities or ownership interests in any
Subsidiary of the Company, (ii) options or other rights to acquire from the
Company or any of its Subsidiaries, or other obligation of the Company or any of
its Subsidiaries to issue, any capital stock or other voting securities or
ownership interests in, or any securities convertible into or exchangeable for
any capital stock or other voting securities or ownership interests in, any
Subsidiary of the Company or (iii) restricted shares, restricted share units,
stock appreciation rights, performance shares, contingent value rights,
"phantom" stock or similar securities or rights that are derivative of, or
provide economic benefits based, directly or indirectly, on the value or price
of, any capital stock of, or other voting securities or ownership interests in,
any Subsidiary of the Company (the items in clauses (i)-(iii) being referred to
collectively as the "COMPANY SUBSIDIARY Securities"). There are no outstanding
obligations of the Company or any of its Subsidiaries to issue, deliver, sell,
repurchase, redeem or otherwise acquire any of the Company Subsidiary
Securities. Neither the Company nor any of its Subsidiaries is a party to any
voting agreements with respect to any Company Subsidiary Securities and, as of
the date of this Agreement there are no irrevocable proxies and no voting
agreements with respect to any Company Subsidiary Securities.
(c) Except as set forth in Section 4.06(c) of the Company Disclosure
Schedule, except for the Company Subsidiary Securities, the Company does not
own, directly or indirectly, any capital stock of, or other equity, ownership,
profit, voting or other interests in, or any interest convertible, exchangeable
or exercisable for, any equity, profit, voting or similar interest in, any
Person.
Section 4.07. SEC Filings and the Sarbanes-Oxley Act. (a) The Company has
delivered or made available to Parent, or the Electronic Data Gathering,
Analysis and Retrieval (EDGAR)
15
database of the SEC contains in a publicly available format, complete and
correct copies of all reports, schedules, forms, statements and other documents
filed by the Company with or furnished by the Company to the SEC since January
1, 2004 (collectively, the "COMPANY SEC DOCUMENTS"). Since January 1, 2004, the
Company has filed with or furnished to the SEC each report, schedule, form,
statement or other document or filing required by Law to be filed or furnished
at or prior to the time so required. No Subsidiary of the Company is required to
file or furnish any report, schedule, form, statement or other document or
filing with the SEC.
(b) As of their respective dates, each of the Company SEC Documents
complied, and each such Company SEC Document filed subsequent to the date hereof
will comply, as to form in all material respects with the applicable
requirements of the 1933 Act and the 1934 Act, as the case may be.
(c) As of its filing date (or, if amended or superseded by a filing
prior to the date hereof, on the date of such filing), each Company SEC Document
filed pursuant to the 1934 Act did not, and each such Company SEC Document filed
subsequent to the date hereof will not, contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. The Company has provided to Parent copies of all comment
letters received from the SEC since January 1, 2004 relating to the Company SEC
Documents, and any written responses of the Company thereto. There are no
outstanding or unresolved comments in any comment letters received by the
Company from the SEC. As of the date of this Agreement, to the Knowledge of the
Company, none of the Company SEC Documents is the subject of any ongoing review
by the SEC.
(d) Each Company SEC Document that is a registration statement, as
amended or supplemented, if applicable, filed pursuant to the 1933 Act, as of
the date such registration statement or amendment became effective, did not, and
each such Company SEC Document that becomes effective subsequent to the date
hereof will not, as of such date, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading.
(e) The Company is in compliance in all material respects with the
provisions of the Sarbanes-Oxley Act and the rules and regulations promulgated
thereunder applicable to it. The Company has promptly disclosed, by filing a
Form 8-K, any change in or waiver of the Company's code of ethics, as required
by Section 406(b) of the Sarbanes-Oxley Act. To the Knowledge of the Company,
there have been no violations of provisions of the Company's code of ethics.
(f) The Company has established and maintains disclosure controls and
procedures (as defined in Rule 13a-15 under the 1934 Act). Such disclosure
controls and procedures are designed to ensure that material information
relating to the Company, including its consolidated Subsidiaries, is made known
to the Company's principal executive officer and its principal financial officer
by others within those entities, particularly during the periods in which the
periodic reports required under the 1934 Act are being prepared. Such disclosure
controls and procedures are effective in timely alerting the Company's principal
executive officer and principal financial officer to material information
required to be included in the Company's periodic reports required under the
1934 Act.
(g) The Company and its Subsidiaries have established and maintain a
system of internal control over financial reporting (as defined in Rule 13a-15
under the 1934 Act) ("INTERNAL
16
CONTROLS"). Such internal controls are sufficient to provide reasonable
assurance regarding the reliability of the Company's financial reporting and the
preparation of Company financial statements for external purposes in accordance
with GAAP. The Company has disclosed, based on its most recent evaluation of
internal controls prior to the date hereof, to the Company's auditors and audit
committee (x) any significant deficiencies and material weaknesses in the design
or operation of internal controls which are reasonably likely to adversely
affect 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 internal controls. The Company
has made available to Parent a summary of any such disclosure made by management
to the Company's auditors and audit committee since April 1, 2006.
(h) There are no outstanding loans or other extensions of credit made
by the Company or any of its Subsidiaries to any executive officer (as defined
in Rule 3b-7 under the 1934 Act) or director of the Company. The Company has
not, since the enactment of the Sarbanes-Oxley Act, taken any action prohibited
by Section 402 of the Sarbanes-Oxley Act.
Section 4.08. Financial Statements. The financial statements (including the
notes) of the Company included in the Company SEC Documents complied, at the
time the respective statements were filed, or with respect to Company SEC
Document filed subsequent to the date hereof will comply, at the time the
respective statements are filed, as to form in all material respects with the
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been or will be prepared in accordance with
GAAP applied on a consistent basis (except as may be indicated in the notes
thereto) and fairly present the consolidated financial position of the Company
and its consolidated Subsidiaries as of the dates thereof and their consolidated
results of operations and cash flows for the periods then ended.
Section 4.09. Disclosure Documents. The proxy or information statement of
the Company to be filed with the SEC in connection with the Merger (the "COMPANY
PROXY STATEMENT") and any amendments or supplements thereto will, when filed,
comply as to form in all material respects with the applicable requirements of
the 1934 Act. At the time the Company Proxy Statement or any amendment or
supplement thereto is first mailed to stockholders of the Company and at the
time such stockholders vote on adoption of this Agreement, the Company Proxy
Statement, as supplemented or amended, if applicable, will not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. Any other documents filed by the
Company with the SEC pursuant to Regulation 14A under the 1934 Act (the "COMPANY
PROXY MATERIALS") will not, at the time they are filed with the SEC or otherwise
disseminated to the stockholders of the Company or the public, contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. The representations and warranties
contained in this Section 4.09 will not apply to statements or omissions
included in the Company Proxy Statement or Company Proxy Materials based upon
information furnished to the Company in writing by Parent specifically for use
therein.
Section 4.10. Absence of Certain Changes. Except as disclosed in Section
4.10 of the Company Disclosure Schedule, since the Company Balance Sheet Date,
the Company and its Subsidiaries have conducted their businesses in the ordinary
course of business and in a manner consistent with past practices, and there has
not been:
17
(a) any event, occurrence, development or state of circumstances or
facts that has had or could have, individually or in the aggregate, a Material
Adverse Effect on the Company;
(b) any amendment of the articles of incorporation, bylaws or other
similar organizational documents (whether by merger, consolidation or otherwise)
of the Company or its Subsidiaries;
(c) any splitting, combination or reclassification of any shares of
capital stock of the Company or any of its Subsidiaries or declaration, setting
aside or payment of any dividend or other distribution (whether in cash, stock
or property or any combination thereof) in respect of its capital stock, or
redemption, repurchase or other acquisition or offer to redeem, repurchase, or
otherwise acquire any Company Securities or any Company Subsidiary Securities,
except for regular quarterly cash dividends with customary record and payment
dates on the shares of Company Stock not in excess of $0.10 per share per
quarter;
(d) (i) any issuance, delivery or sale, or authorization of the
issuance, delivery or sale of, any shares of any Company Securities or Company
Subsidiary Securities, other than the issuance of (A) any shares of the Company
Stock upon the exercise of Company Stock Options that were outstanding on the
Company Balance Sheet Date in accordance with the terms of those options on the
Company Balance Sheet Date and (B) any Company Subsidiary Securities to the
Company or any other Subsidiary or (ii) amendment of any term of any Company
Security or any Company Subsidiary Security (in each case, whether by merger,
consolidation or otherwise);
(e) authorization of, or commitment to make, capital expenditures in
excess of $500,000 in the aggregate;
(f) any acquisition (by merger, consolidation, acquisition of stock or
assets or otherwise), directly or indirectly, by the Company or any of its
Subsidiaries of any Person or any division of any Person or any material amount
of assets of in any Person;
(g) any sale, lease or other transfer, or creation or incurrence of
any Lien on, any assets, securities, properties, interests or businesses of the
Company or any of its Subsidiaries, other than sales of inventory in the
ordinary course of business consistent with past practice;
(h) other than in connection with actions permitted by Section 4.10(d)
or Section 4.10(e), the making by the Company or any of its Subsidiaries of any
loans, advances or capital contributions to, or investments in, any other
Person, other than in the ordinary course of business consistent with past
practice;
(i) the creation, incurrence, assumption or sufferance to exist by the
Company or any of its Subsidiaries of any indebtedness for borrowed money or
guarantees thereof;
(j) the entering into of any agreement or arrangement that limits or
otherwise restricts in any material respect the Company, any of its Subsidiaries
or any of their respective Affiliates or any successor thereto or that could,
after the Effective Time, limit or restrict in any material respect the Company,
any of its Subsidiaries, the Surviving Corporation, Parent or any of their
respective Affiliates, from engaging or competing in any line of business, in
any location or with any Person;
18
(k) the entering into, amendment or modification in any material
respect or termination of any Material Contract or waiver, release or assignment
of any material rights, claims or benefits of the Company or any of its
Subsidiaries;
(l) (i) any grant or increase of any severance or termination pay to
(or amendment of any existing arrangement with) any director, officer or
employee of the Company or any of its Subsidiaries, (ii) any increase in
benefits payable under any existing severance or termination pay policies or
employment agreements, (iii) the entry into any employment, deferred
compensation or other similar agreement (or amendment of any such existing
agreement) with any director, officer or employee of the Company or any of its
Subsidiaries, (iv) any establishment, adoption or amendment (except as required
by Applicable Law) of any collective bargaining, bonus, profit-sharing, thrift,
pension, retirement, deferred compensation, compensation, stock option,
restricted stock or other benefit plan or arrangement covering any director,
officer or employee of the Company or any of its Subsidiaries or (v) any
material increase in compensation, bonus or other benefits payable to any
director, officer or employee of the Company or any of its Subsidiaries;
(m) any material labor dispute, other than routine individual
grievances, or any activity or proceeding by a labor union or representative
thereof to organize any employees of the Company or any of its Subsidiaries,
which employees were not subject to a collective bargaining agreement at the
Company Balance Sheet Date, or any lockouts, strikes, slowdowns, work stoppages
or threats thereof by or with respect to such employees;
(n) any change in the Company's methods of accounting, except as
required by Applicable Law or GAAP;
(o) any settlement of, or offer or proposal to settle, (i) any
material litigation, investigation, arbitration, proceeding or other claim
involving or against the Company or any of its Subsidiaries, (ii) any
stockholder litigation or dispute against the Company or any of its officers or
directors or (iii) any litigation, arbitration, proceeding or dispute that
relates to the transactions contemplated hereby;
(p) any write-down by the Company or any of its Subsidiaries of any of
the material assets of the Company or its Subsidiaries not in the usual course
of business; or
(q) any Tax election made or changed other than in the ordinary course
of business, any annual tax accounting period made or changed, any method of tax
accounting adopted or changed, any Tax Returns amended materially or claims for
material Tax refunds filed, any material closing agreement entered into, any
material Tax claim, audit or assessment settled, or any right to claim a
material Tax refund, offset or other reduction in Tax liability surrendered.
Section 4.11. No Undisclosed Material Liabilities. There are no liabilities
or obligations of the Company or any of its Subsidiaries of any kind whatsoever,
whether accrued, contingent, absolute, determined, determinable or otherwise,
and there is no existing condition, situation or set of circumstances that could
reasonably be expected to result in such a liability or obligation, other than:
(a) liabilities or obligations disclosed and provided for in the
Company Balance Sheet or in the notes thereto,
19
(b) liabilities or obligations incurred in the ordinary course of
business consistent with past practices since the Company Balance Sheet Date
which are not material in amount to the Company and its Subsidiaries taken as a
whole;
(c) liabilities and obligations under this Agreement; and
(d) other liabilities or obligations which are not material in amount
to the Company and its Subsidiaries taken as a whole.
Section 4.12. Compliance with Laws; Permits. Except as listed in Section
4.18 of the Company Disclosure Schedule, the Company and each of its
Subsidiaries is, and since January 1, 2004, has been in compliance in all
material respects with Applicable Law, and has not received notice of any
investigation with respect to or been threatened to be charged with or given
notice of any violation of any Applicable Law. The Company and each of its
Subsidiaries is and, since January 1, 2004 has been in compliance in all
material respects with their respective material Permits, and has not received
notice of any violation related to any such Permit or any revocation or
threatened revocation of any such Permit.
Section 4.13. Litigation. Except as listed in Section 4.13 of the Company
Disclosure Schedule, there is no claim, action, suit, investigation or
proceeding ("PROCEEDINGS") pending against, or, to the Knowledge of the Company,
threatened against or affecting, the Company, any of its Subsidiaries, any
present or former officer, director or employee of the Company or any of its
Subsidiaries or any Person for whom the Company or any Subsidiary may be liable
or any of their respective properties before any court or arbitrator or before
or by any Governmental Authority. Neither the Company nor any of its
Subsidiaries is subject to any order, writ, judgment, injunction, decree,
determination or award of any Governmental Authority (each, an "ORDER") against
the Company or any of its Subsidiaries or naming the Company or any of its
Subsidiaries as a party or by which any of the employees or representatives of
the Company or any of its Subsidiaries is prohibited or restricted from engaging
in or otherwise conducting the business of the Company or any of its
Subsidiaries as presently conducted.
Section 4.14. Finders' Fees; Expenses. Except for Houlihan Lokey Howard &
Zukin Capital, Inc. and Houlihan Lokey Howard & Zukin Financial Advisors, Inc.,
there is no investment banker, broker, finder or other intermediary that has
been retained by or is authorized to act on behalf of the Company or any of its
Subsidiaries who might be entitled to any fee or commission from the Company or
any of its Affiliates in connection with the transactions contemplated by this
Agreement. The Company has delivered to Parent a copy of any agreement pursuant
to which any such fee or commission may be payable and any indemnification and
other agreements related to the engagement of the persons to whom such fees are
payable. Section 4.14 of the Company Disclosure Schedule sets forth the
Company's good faith estimate of the aggregate fees and expenses of any
accountants, brokers, financial advisors, consultants, legal counsel or other
persons retained by the Company incurred or to be incurred by the Company and
its Subsidiaries in connection with this Agreement or the transactions
contemplated hereby.
Section 4.15. Opinion of Financial Advisor. The Company has received the
opinion of Houlihan Lokey Howard & Zukin Financial Advisors, Inc., dated October
1, 2007, to the effect that, as of that date, the consideration to be received
in the Merger by the holders of the Company Common Stock (other than the
Continuing Stockholders and their Affiliates) is fair from a financial point of
view to such holders.
20
Section 4.16. Taxes. (a) All Tax Returns required by Applicable Law to be
filed with any Taxing Authority by, or on behalf of, the Company or any of its
Subsidiaries have been filed when due (including extensions) in accordance with
all Applicable Laws, and all such Tax Returns are true and complete in all
material respects.
(b) The Company and each of its Subsidiaries has paid (or has had paid
on its behalf) or has withheld and remitted to the appropriate Taxing Authority
all material Taxes shown as due and payable on the Tax Returns that have been
filed and any other material Taxes that are due and payable, or, where payment
is not yet due (or with respect to Taxes which are being contested in good
faith), has established (or has had established on its behalf and for its sole
benefit and recourse) in accordance with GAAP an adequate accrual for all
material Taxes through the end of the last period for which the Company and its
Subsidiaries ordinarily record items on their respective books.
(c) There is no claim, audit, action, suit, proceeding or
investigation now pending or, to the Company's Knowledge, threatened against or
with respect to the Company or its Subsidiaries in respect of any Tax or Tax
asset.
(d) During the five-year period ending on the date hereof, neither the
Company nor any of its Subsidiaries was a distributing corporation or a
controlled corporation in a transaction intended to be governed by Section 355
of the Code.
(e) The Company has provided or made available to Parent true and
complete copies of all United States and California State Tax Returns filed with
respect to it or its Subsidiaries, as the case may be, for taxable periods
ending after December 31, 2004. The Company has provided a FIN48 summary of all
of its Tax Returns for its Subsidiaries since December 31, 2004.
(f) Neither the Company nor any of its Subsidiaries or any predecessor
has waived any statute of limitations with respect to Taxes or agreed to any
extension of time with respect to a Tax assessment or deficiency, or has made
any request in writing for any such extension or waiver.
(g) Neither the Company nor any of its Subsidiaries has entered into
any "reportable transaction" as such term is defined in Treasury Regulation
Section 1.6011-4(b)(1) or any "listed transaction" within the meaning of
Treasury Regulation Section 1.6011-4(b)(2), or any other transaction requiring
disclosure under analogous provisions of state, local or foreign Tax legal
requirement.
(h) The Company and each of the Subsidiaries have withheld and paid
all Taxes required to be withheld and paid in connection with amounts paid and
owing to any employee, independent contractor, creditor, stockholder or other
third party (whether domestic or foreign).
(i) Neither the Company nor any of its Subsidiaries has liability for
the Taxes of any Person other than the Company and its Subsidiaries (i) under
Treasury Regulations Section 1.1502-6 (or any similar provision of state, local
or foreign legal requirement), (ii) as a transferee or successor, (iii) by
contract, or (iv) otherwise.
(j) There are no adjustments under Section 481 of the Code (or any
similar adjustments under any provision of the Code or the corresponding
foreign, state or local Tax laws) that are required to be taken into account by
the Company or any of its Subsidiaries in any period
21
ending after the Closing Date by reason of a change in method of accounting in
any taxable period ending on or before the Closing Date.
(k) None of the Company or any Subsidiary has been informed by any
jurisdiction that the jurisdiction believes that the Company or any Subsidiary
was required to file any Tax Return or pay any tax that was not filed or was not
paid.
(l) "TAX" means (i) any tax, governmental fee or other like assessment
or charge (including withholding on amounts paid to or by any Person), together
with any interest, penalty, addition to tax or additional amount imposed by any
Governmental Authority (a "TAXING AUTHORITY") responsible for the imposition of
any such tax (domestic or foreign), and any liability for any of the foregoing
as transferee, (ii) in the case of the Company or any of its Subsidiaries,
liability for the payment of any amount of the type described in clause (i) as a
result of being or having been before the Effective Time a member of an
affiliated, consolidated, combined or unitary group, or a party to any agreement
or arrangement, as a result of which liability of the Company or any of its
Subsidiaries to a Taxing Authority is determined or taken into account with
reference to the activities of any other Person, and (iii) liability of the
Company or any of its Subsidiaries for the payment of any amount as a result of
being party to any Tax Sharing Agreement or with respect to the payment of any
amount imposed on any person of the type described in (i) or (ii) as a result of
any existing express or implied agreement or arrangement (including an
indemnification agreement or arrangement). "TAX RETURN" means any report,
return, document, declaration or other information or filing required to be
supplied to any Taxing Authority with respect to Taxes, including information
returns, any documents with respect to or accompanying payments of estimated
Taxes, or with respect to or accompanying requests for the extension of time in
which to file any such report, return, document, declaration or other
information. "TAX SHARING AGREEMENTS" means all existing agreements or
arrangements (whether or not written) binding the Company or any of its
Subsidiaries that provide for the allocation, apportionment, sharing or
assignment of any Tax liability or benefit, or the transfer or assignment of
income, revenues, receipts, or gains for the purpose of determining any Person's
Tax liability excluding any indemnification agreement or arrangement pertaining
to the sale or lease of assets or subsidiaries).
Section 4.17. Employee Benefit Plans. (a) Section 4.17 of the Company
Disclosure Schedule contains a complete and correct list identifying each
"employee benefit plan," as defined in Section 3(3) of ERISA (whether or not
such plan is subject to ERISA), each employment, severance or similar contract,
plan, arrangement or policy and each other plan or arrangement (written or oral,
formal or informal) providing for compensation, bonuses, profit-sharing, stock
option or other stock related rights or other forms of incentive or deferred
compensation, vacation benefits, insurance (including any self-insured
arrangements), health or medical benefits, employee assistance program,
disability or sick leave benefits, workers' compensation, supplemental
unemployment benefits, severance benefits and post-employment or retirement
benefits (including compensation, pension, health, medical or life insurance
benefits) which is maintained, administered or contributed to by the Company or
any Affiliate or with respect to which the Company or any of its Subsidiaries
has or may in the future have any liability (collectively, the "EMPLOYEE
PLANS"). Except as set forth on Section 4.17 of the Company Disclosure Schedule,
copies of such Employee Plans (and, if applicable, any related administrative
agreements, trust or funding agreements, insurance policies, summary plan
descriptions, or summaries of material modifications) and all amendments thereto
and written interpretations thereof have been furnished to Parent together with
the two most recent annual reports and tax returns (including all applicable
schedules) prepared in connection with any such plan
22
or trust, and all material correspondence in connection with any Employee
Benefit Plan to or from any Governmental Authority within the past two years.
(b) Neither the Company nor any subsidiary or other ERISA Affiliate
nor any predecessor thereof sponsors, maintains or contributes to, or has in the
past sponsored, maintained or contributed to, any Employee Plan that is (i)
subject to Title IV of ERISA, (ii) a defined benefit plan, (iii) a plan
described in Section 413 of the Code, (iv) a plan subject to the minimum funding
standards of Section 412 of the Code or Section 302 of ERISA, or (v) a plan
maintained in connection with any trust described in Section 501(c)(9) of the
Code.
(c) Except as listed in Section 4.17(c) of the Company Disclosure
Schedule, neither the Company nor any ERISA Affiliate nor any predecessor
thereof contributes to, or has in the past contributed to, any multiemployer
plan, as defined in Section 3(37) of ERISA (a "MULTIEMPLOYER PLAN") or any
multiple employer plan.
(d) All Employee Benefit Plans that are intended to be qualified under
Section 401(a) of the Code (each, a "QUALIFIED PLAN") have received
determination, opinion or advisory letters from the Internal Revenue Service to
the effect that such Employee Benefit Plans are qualified and the plans and
trusts related thereto are exempt from federal income Taxes under Sections
401(a) and 501(a), respectively, of the Code, or the sponsor thereof has
remaining a period of time under applicable U.S. Department of the Treasury
regulations or Internal Revenue Service pronouncements in which to apply for
such a letter and to make any amendments necessary to obtain a favorable
determination as to the qualified status of each such Qualified Plan. No such
determination, opinion or advisory letter has been revoked and, to the Knowledge
of the Company, revocation has not been threatened, nor has any amendment to an
Employee Benefit Plan has been adopted since the date of such letter covering
such Employee Benefit Plan that would adversely affect such favorable
determination. No Qualified Plan has been amended or operated since the date of
its most recent determination letter or application therefor in any respect, and
no act or omission has occurred, that would reasonably be expected to adversely
affect its qualification or materially increase its cost. The Company has made
available to Parent copies of the most recent Internal Revenue Service
determination, opinion or advisory letters, as the case may be, with respect to
each Qualified Plan.
(e) Each Employee Plan has been maintained in compliance with its
terms and with the requirements prescribed by any and all Applicable Laws,
including ERISA and the Code. Neither the Company nor, to the Company's
Knowledge, any other Person, has engaged in any transaction or omission with
respect to any Employee Benefit Plan that could subject the Company to any Tax
or penalty (civil or otherwise) imposed by ERISA, the Code or other applicable
legal requirements.
(f) Except as set forth in Section 4.17(f) of the Company Disclosure
Schedule, the consummation of the transactions contemplated by this Agreement
will not (either alone or together with any other event) entitle any employee or
independent contractor of the Company or any of its Subsidiaries to severance,
bonus or other pay or accelerate the time of payment or vesting or trigger any
payment or funding (through a grantor trust or otherwise) of compensation or
benefits or increase the amount payable or trigger any other material obligation
pursuant to any Employee Plan. Section 4.17(f) of the Company Disclosure
Schedule sets forth a complete and correct list (i) all the agreements,
arrangements and other instruments which give rise to an obligation to make or
set aside amounts payable to or on behalf of the officers of the Company and its
Subsidiaries as a result of the
23
transactions contemplated by this Agreement and/or any subsequent employment
termination (whether by the Company or the officer), true and complete copies of
which have been previously provided to Parent and (ii) the maximum aggregate
amounts so payable to each such individual as a result of the transactions
contemplated by this Agreement and/or any subsequent employment termination
(whether by the Company or the officer).
(g) Except as set forth in Section 4.17(g) of the Company Disclosure
Schedule, the consummation of the transactions contemplated by this Agreement
and/or subsequent employment termination (whether by the Company or the officer)
whether alone or in connection with any other event, will not (i) result in a
material increase in or accelerate the vesting of any of the benefits available
under any Employee Benefit Plan, or (ii) result in any payment or series of
payments by the Company to any employee or other Person which could constitute
an "excess parachute payment" within the meaning of Section 280G of the Code or
that would not be deductible on the Company's corporate tax return under Section
162(m) of the Code.
(h) Neither the Company nor any of its Subsidiaries has any liability
in respect of post-retirement health, medical or life insurance benefits for
retired, former or current employees of the Company or its Subsidiaries except
as required to avoid excise tax under Section 4980B of the Code or similar
non-U.S. law.
(i) There has been no amendment to, written interpretation or
announcement (whether or not written) by the Company or any of its Affiliates
relating to, or change in employee participation or coverage under, an Employee
Plan which would increase materially the expense of maintaining such Employee
Plan above the level of the expense incurred in respect thereof for the fiscal
year ended March 31, 2007.
(j) Except as listed in Section 4.17(j) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries is or has in the past
been a party to or subject to, or is currently negotiating in connection with
entering into, any collective bargaining agreement or other contract or
understanding with a labor union or organization.
(k) All contributions and payments accrued under each Employee Plan,
determined in accordance with prior funding and accrual practices, as adjusted
to include proportional accruals for the period ending as of the date hereof,
have been discharged and paid on or prior to the date hereof except to the
extent reflected as a liability on the Company Balance Sheet.
(l) There is no action, suit, investigation, audit or proceeding
pending against, involving or threatened against any Employee Plan.
(m) There is no outstanding loan by the Company or any Subsidiary to
any employee or independent contactor.
(n) No work stoppage, slowdown, or labor strike against the Company is
pending or reasonably anticipated, or, to the Company's Knowledge, threatened
with respect to the employee, (ii) the Company has no Knowledge of any
activities or proceedings of any labor union to organize any employee, or of
other organizational campaigns, petitions or other unionization activities;
(iii) there are no actions, suits, claims, labor disputes or grievances pending,
or, to the Knowledge of the Company, threatened or reasonably anticipated
relating to any labor, safety or discrimination matters involving any employee,
including charges of unfair labor practices or discrimination
24
complaints; and (vi) Company is currently in compliance with all Applicable Laws
relating to the employment of labor, including those related to wages, hours,
collective bargaining and the payment and withholding of taxes and other sums as
required by the appropriate Governmental Authority.
(o) Each Employee Benefit Plan that is a "nonqualified deferred
compensation plan" (as defined for purposes of Section 409A(d)(1) of the Code)
(1) has been operated since January 1, 2005 in good faith compliance with
Section 409A of the Code and all applicable IRS guidance promulgated thereunder
to the extent such plan is subject to Section 409A of the Code, and (2) as to
any such plan in existence prior to January 1, 2005 and not subject to Section
409A of the Code, has not been "materially modified" (within the meaning of IRS
Notice 2005-1) at any time after October 3, 2004. No Company Stock Option
(whether currently outstanding or previously exercised) is, has been or would
be, as applicable, subject to any tax, penalty or interest under Section 409A of
the Code.
(p) Except as set forth on Section 4.17(p) of the Company Disclosure
Schedule, no Employee Benefit Plan is maintained outside the jurisdiction of the
United States, or covers any employee residing or working outside the United
States (any such Benefit Plan, a "FOREIGN BENEFIT PLAN"). With respect to any
Foreign Benefit Plans, (A) all Foreign Benefit Plans have been established,
maintained and administered in compliance in all material respects with their
terms and all Applicable Laws of any controlling Governmental Authority, (B) all
Foreign Benefit Plans that are required to be funded are fully funded, and with
respect to all other Foreign Benefit Plans, adequate reserves therefor have been
established on the applicable closing financial statements, and (C) no material
liability or obligation of the Company or its Subsidiaries exists with respect
to such Foreign Benefit Plans that has not been disclosed on Section 4.17(p) of
the Company Disclosure Schedule.
Section 4.18. Environmental Matters. (a) Except for matters that are
disclosed in Section 4.18 of the Company Disclosure Schedule, and have been
disclosed in the Company's SEC Reports:
(i) no notice, notification, demand, request for information,
citation, summons or order has been received, no complaint has been filed, no
penalty has been assessed, and no investigation, action, claim, suit, proceeding
or review (or any basis therefor) is pending or, to the Knowledge of the
Company, is threatened by any Governmental Authority or other Person relating to
the Company or any Subsidiary and relating to or arising out of any
Environmental Law, other than any of the foregoing that would not have or be
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect;
(ii) the Company and its Subsidiaries are and have been in
material compliance with all Environmental Laws and all Environmental Permits,
and the Company and its Subsidiaries possess all material Environmental Permits
required under applicable Environmental Laws for the conduct of their business,
is in compliance in all material respects with the terms and conditions thereof
and has timely applied for any renewal of the same; and
(iii) there are no material liabilities or obligations of the
Company or any of its Subsidiaries of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise arising under or
relating to any Environmental Law or any Hazardous Substance and any release
thereof, and there is no condition, situation or set of circumstances that could
reasonably be expected to result in or be the basis for any material liability
or obligation.
25
(b) Except for what is listed in Section 4.18 of the Company
Disclosure Schedule, there has been no environmental investigation, study,
audit, test, review or other analysis conducted of which the Company has
knowledge in relation to the current or prior business of the Company or any of
its Subsidiaries or any property or facility now or previously owned or leased
by the Company or any of its Subsidiaries that has not been delivered to Parent
at least five Business Days prior to the date hereof.
(c) Neither the Company nor any of its Subsidiaries owns, leases or
operates or has owned, leased or operated any real property, or conducts or has
conducted any operations, in New Jersey or Connecticut.
(d) Section 4.18 of the Company Disclosure Letter sets forth a
complete list of Environmental Permits required under applicable Environmental
Laws for the conduct of business by the Company and its Subsidiaries.
(e) For purposes of this Section 4.18, the terms "COMPANY" and
"SUBSIDIARIES" shall include any entity that is, in whole or in part, a
predecessor of the Company or any of its Subsidiaries.
(f) Notwithstanding anything else in this Agreement to the contrary,
this Section 4.18 contains the sole and exclusive representations and warranties
of the Company with respect to any environmental health and safety matters,
including without limitation any matters arising under any Environmental Laws.
Section 4.19. Material Contracts. (a) Section 19 of the Company Disclosure
Schedule contains a complete and correct list as of the date of this Agreement
of each of the following Contracts to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
legally bound:
(i) each Contract between the Company or any of its Subsidiaries
and any of the 20 largest customers of the Company and any of its Subsidiaries
(determined on the basis of aggregate revenues received by the Company or any of
its Subsidiaries over the four consecutive fiscal quarter period ended June 29,
2007) (each such customer, a "MAJOR CUSTOMER");
(ii) each Contract between the Company or any of its Subsidiaries
and any of the 30 largest licensors or other suppliers to the Company and any of
its Subsidiaries (determined on the basis of aggregate amounts paid by the
Company or any of its Subsidiaries over the four consecutive fiscal quarter
period ended June 29, 2007) (each such licensor or other supplier, a "Major
Supplier");
(iii) each Contract that contains any provisions restricting the
Company or any of its Affiliates or any successor thereto (or that could, after
the Effective Time, limit or restrict in any material respect the Company, any
of its Subsidiaries, the Surviving Corporation, Parent or any of their
respective Affiliates) from competing in any line of business or with any Person
or in any area or engaging in any activity or business (including with respect
to the development, manufacture, marketing or distribution of their respective
products or services), or pursuant to which any benefit or right is required to
be given or lost as a result of so competing or engaging, or which would have
any such effect after the Closing Date;
26
(iv) each Contract that (A) grants any exclusive license or
supply or distribution agreement or other exclusive rights or (B) contains any
provision that requires the purchase of all or a given portion of the
requirements of the Company or any of its Subsidiaries from a given third party,
or any other similar provision;
(v) each Contract pursuant to which the Company or any of its
Subsidiaries grants "most favored nation" or similar pricing or terms;
(vi) each Contract pursuant to which the Company or any of its
Subsidiaries has been granted or granted any license to Intellectual Property
Rights, other than nonexclusive licenses granted by the Company or any of its
Subsidiaries to any customer in the ordinary course of business of the Company
and its Subsidiaries consistent with past practice;
(vii) each lease or sublease of real property and each lease or
sublease of personal property, in each case to which the Company or any of its
Subsidiaries is party as either lessor or lessee;
(viii) each Contract relating to Indebtedness;
(ix) each Contract to which the Company or any of its
Subsidiaries is party creating or granting a Lien (including Liens upon
properties acquired under conditional sales, capital leases or other title
retention or security devices);
(x) each Contract under which the Company or any of its
Subsidiaries has, directly or indirectly, made any loan, capital contribution
to, or other investment in, any Person (other than the Company or any of its
Subsidiaries and other than extensions of credit in the ordinary course of
business consistent with past practice);
(xi) each Contract under which the Company or any of its
Subsidiaries has any material obligations that have not been satisfied or
performed relating to the acquisition or disposition of all or any portion of
the business of the Company (whether by merger, sale of stock, sale of assets or
otherwise);
(xii) each Contract under which the Company or any of its
Subsidiaries has acquired or disposed of any portion of any business (whether by
merger, sale of stock, sale or assets or otherwise) since January 1, 2004;
(xiii) each partnership, joint venture or other similar Contract
or arrangement;
(xiv) each employee collective bargaining agreement or other
Contract with any labor union and each employment Contract (other than for
employment at-will or similar arrangements) that is not terminable by the
Company without notice and without cost to the Company;
(xv) each Contract relating to the settlement or other resolution
of any suit, claim, action, investigation or other Proceeding entered into since
January 1, 2003;
27
(xvi) except for the Contracts disclosed above, each Contract
that has aggregate future sums due to or from the Company and its Subsidiaries,
taken as a whole, for the 12-month period ending on June 30, 2008, in excess of
$500,000; and
(xvii) except for the Contracts disclosed above, each Contract
required to be filed by the Company pursuant to Item 601(b)(10) of Regulation
S-K under the 1933 Act, or that is otherwise material to Company and its
Subsidiaries, taken as a whole, and not entered into in the ordinary course of
business consistent with past practice.
(b) Each Contract disclosed in Section 4.19 of the Company Disclosure
Schedule, required to be disclosed pursuant to this Section 4.19 or which would
have been required to be so disclosed pursuant to this Section 4.19 if it had
existed on the date of this Agreement (each, a "MATERIAL CONTRACT") is in full
force and effect and is a legal, valid and binding agreement of the Company or a
Subsidiary, as the case may be, and, to the Knowledge of the Company of each
other party thereto, enforceable against the Company or such Subsidiary, as the
case may be, and, to the Knowledge of the Company against the other party or
parties thereto, in each case, in accordance with its terms except as such
enforceability may be limited by bankruptcy, insolvency, moratorium and other
similar Applicable Law affecting creditors' rights generally and by general
principles of equity. No notice to terminate, in whole or part, any of the same
has been served (nor, to the Knowledge of the Company, has there been any
indication that any such notice of termination will be served), none of the
Company, any of its Subsidiaries or, to the Knowledge of the Company any other
party thereto, is in default or breach in any material respect under the terms
of any Material Contract, and, to the Knowledge of the Company, no event or
circumstance has occurred that, with notice or lapse of time or both, would
constitute any event of default thereunder. To the Knowledge of the Company,
there are no circumstances that are reasonably likely to occur that are
reasonably likely to adversely affect the ability of the Company or any of its
Subsidiaries to perform its material obligations under any Material Contract.
(c) Since June 29, 2007, none of the Major Customers or Major
Suppliers has terminated, failed to renew or requested any material amendment to
any of its Contracts or any of its existing relationships with the Company or
any of its Subsidiaries.
(d) Except as set forth on Section 4.19 of the Company Disclosure
Schedule, the Company has delivered to Parent complete and correct copies of
each Material Contract in existence as of the date of this Agreement, as amended
and supplemented.
Section 4.20. Insurance Policies. The Company and the Subsidiaries have
obtained and maintained in full force and effect insurance in such amounts, on
such terms and covering such risks as are customary for the business of the
Company and its Subsidiaries. Section 4.20 of the Company Disclosure Schedule
contains a description of the policies of insurance of the Company presently in
force, specifying with respect to each such policy, the name of the insurer,
type of coverage, term of policy, deductible amount, limits of liability and
annual premium (and, if the owner of such policy is not the Company, the name of
the owner of such policy). All such policies are valid, outstanding and
enforceable, all premiums due and payable thereon have been paid and neither the
Company nor any Subsidiary has agreed to modify or cancel any of such insurance
policies nor has the Company received any notice of any actual or threatened
modification or cancellation of such insurance other than in the ordinary course
of business and consistent with past practice or such as is normal and customary
in the Company's industry (and, in the case of cancellation, such policy has
been replaced on substantially similar terms prior to the date of such
cancellation). There is no material claim
28
pending under any such material policies as to which coverage has been
questioned, denied or disputed.
Section 4.21. Intellectual Property. (a) The Company and its Subsidiaries
own or otherwise hold the right to use all material Intellectual Property Rights
necessary for the conduct of the business of the Company and its Subsidiaries as
currently conducted or as currently proposed to be conducted by the Company or
any of its Subsidiaries (the "NECESSARY IP RIGHTS"). The consummation of the
transactions contemplated by this Agreement will not alter, restrict, encumber,
impair or extinguish any Necessary IP Rights.
(b) Except as listed in Section 4.21(b) of the Company Disclosure
Schedule, there are no Proceedings pending or threatened in writing, or to the
Knowledge of the Company, orally (i) alleging infringement, misappropriation or
any other violation of any Intellectual Property Rights of any Person by the
Company or any of its Subsidiaries or any of their respective products or
services, or (ii) challenging the scope, ownership, validity, or enforceability
of the Company-Owned IP or of the Company and its Subsidiaries' rights under the
Company IP. None of the Company or any of its Subsidiaries has infringed,
misappropriated or otherwise violated any Intellectual Property Rights of any
Person.
(c) (i) The Company and its Subsidiaries hold all right, title and
interest in and to the Company-Owned IP, free and clear of any Liens and (ii)
there are no restrictions on the disclosure, use, license or transfer of the
Company-Owned IP or material Company IP.
(d) Section 4.21(d) of the Company Disclosure Schedule contains a
complete and correct list of all Registered IP. The Company and its Subsidiaries
have taken all actions necessary to maintain and protect the Registered IP,
including payment of applicable maintenance fees, filing of applicable
statements of use, timely response to office actions and disclosure of any
required information, and all assignments (and licenses where required) of the
Registered IP have been duly recorded with the appropriate Governmental
Authorities. The Company and each of its Subsidiaries have complied with all
applicable notice and marking requirements for the Registered IP. None of the
Registered IP has been adjudged invalid or unenforceable in whole or part and,
to the Knowledge of the Company, all Registered IP is valid and enforceable.
There are no actions that are required to be taken by the Company or any of its
Subsidiaries prior to February 1, 2008 with respect to the Registered IP.
(e) Section 4.21(e) of the Company Disclosure Schedule contains (A) a
complete and correct list of all licenses and other Contracts pursuant to which
the Company or any Subsidiary is granted rights in any third-party Intellectual
Property (x) embedded or incorporated into or distributed with any of the
Company's products, (y) used by the Company or any of its Subsidiaries in the
development or support of any of the Company's products or (z) used or held for
use by the Company for any other purpose (excluding, for purposes of clause (z)
only, any non-material generally available, off-the-shelf software programs
licensed by the Company on standard non-negotiated terms) and (B) a summary of
the Company's and its Subsidiaries' remaining payment and accounting
obligations, if any, with respect to each of the Contracts listed thereon,
excluding non-material agreements for generally available, off-the-shelf
software programs licensed by the Company on standard non-negotiated terms. The
Company has delivered to Parent copies of all licenses, sublicenses and other
agreements identified above. The Company and its Subsidiaries are not in
material breach or default under any such agreement nor has the Company or any
of its Subsidiaries received in writing any claim or notice of default under any
such agreement. No person
29
other than the Company or its Subsidiaries possesses any current or contingent
rights (arising from the use of Public Software or otherwise) to receive, use or
otherwise exploit any source code that is part of the Company Owned IP.
(f) No software covered by or embodying any Company-Owned IP has been
or is being distributed, directly or indirectly, by or on behalf of the Company
or any of its Subsidiaries, in whole or in part, or was used, or is being used
in conjunction with any Public Software by or on behalf of the Company or any of
its Subsidiaries in a manner which would require that such software be disclosed
or distributed in source code form or made available at no charge.
(g) The Company and its Subsidiaries have taken all reasonable steps
to protect their rights in the Company-Owned IP and to protect any confidential
information provided to them by any other Person under obligation of
confidentiality. Without limitation of the foregoing, the Company and its
Subsidiaries have not made any of their material trade secrets or other
confidential or proprietary information available to any other Person except
pursuant to written agreements requiring such Person to maintain the
confidentiality of such information or materials. The Company and its
Subsidiaries have and enforce a policy requiring each employee and consultant of
the Company or any of its Subsidiaries to execute a proprietary rights and
confidentiality agreement substantially in the form provided to Parent, and all
current and former employees and consultants of the Company and its Subsidiaries
with access to confidential information of the Company or its Subsidiary have
executed such an agreement.
(h) The Company and its Subsidiaries have obtained from all parties
(including current or former directors, officers or employees) who have created
any portion of, or otherwise who would have any rights in or to, any
Company-Owned IP or who developed any Intellectual Property Rights for the
Company or its Subsidiaries, valid and enforceable written assignments of any
such rights to the Company and its Subsidiaries and has thereby obtained
ownership of, and is the exclusive owner of all such independent contractor's or
third party's rights in such Company-Owned IP or Intellectual Property Rights.
The Company has provided true and complete copies of such assignments to Parent.
Neither the Company nor any of its Subsidiaries is obligated to provide any
consideration (whether financial or otherwise) to any third party with respect
to any exercise of rights by the Company or any of its Subsidiaries, or any
successor to the Company or any of its Subsidiaries, in any Company IP.
(i) Neither the Company nor any of its Subsidiaries has transferred
ownership of, or granted any exclusive license with respect to, any Company IP
to any other Person. Other than pursuant to non-exclusive licenses granted in
the ordinary course of business to customers and distributors with respect to
the Company's products as listed in Section 4.21(i) of the Company Disclosure
Schedule, no third party holds any license or right to use the Company IP. The
Company has delivered to Parent copies of all licenses and agreements identified
above.
(j) No funding, facilities or personnel of any Governmental Authority
were used, directly or indirectly, to develop or create, in whole or in part,
any Company-Owned IP. Neither the Company nor any Subsidiary is or has ever been
a member or promoter of, or a contributor to, any industry standards body or
similar organization that could compel the Company or such Subsidiary to grant
or offer to any other Person any license or right to any Company-Owned IP.
(k) Neither the Company nor any of its Subsidiaries has brought any
actions or lawsuits alleging (i) infringement of any of the Company-Owned IP or
(ii) breach of any license,
30
sublicense or other agreement authorizing another party to use the Company IP,
and, to the Company's Knowledge, as of the date hereof, there is no infringement
of any Company-Owned IP or material breach of any license, sublicense or other
agreement authorizing another party to use the Company IP. Neither the Company
nor any of its Subsidiaries has entered into any agreement granting any third
party the right to bring infringement actions with respect to, or otherwise to
enforce rights with respect to, any of the Company-Owned IP.
(l) Immediately following the Effective Time, the Surviving
Corporation will be permitted to exercise all of the rights of the Company or
any of its Subsidiaries under their respective contracts, licenses and
agreements to the same extent as the Company or any of its Subsidiaries would
have been able to had the transactions contemplated by this Agreement not
occurred and without the payment of any additional amounts or consideration
other than ongoing fees, royalties or payments which the Company or its
Subsidiaries would otherwise be required to pay, except as a result of any
agreements, contracts, licenses and agreements that Parent or the Merger Sub is
subject to prior to the consummation of the transactions contemplated by this
Agreement. Neither this Agreement nor the transactions contemplated hereby, will
directly result in (i) Parent or Surviving Corporation granting to any third
party any right to, or with respect to, any material Intellectual Property Right
owned by, or licensed to, either of them, (ii) Parent or Surviving Corporation
being bound by, or subject to, any non-compete or other material restriction on
the operation or scope of its business, or (iii) Parent or Surviving Corporation
being obligated to pay any royalties or other material amounts to any third
party in excess of those payable by Company or its Subsidiaries prior to the
Effective Time, except as a result of any contracts, licenses and agreements
that Parent or the Merger Sub is subject to prior to the consummation of the
transactions contemplated by this Agreement.
Section 4.22. Products. The Company has provided to Parent complete and
correct current lists of each of the products produced or sold by the Company or
any of its Subsidiaries in the form of Distributor Price Lists for each
applicable geographic region. Each of such products is (i) in compliance in all
material respects with Applicable Law and (ii) fit for the ordinary purposes for
which it is intended to be used and conforms in all material respects to any
promises or affirmations of fact made on the documentation, container or label
for such product or in connection with its sale. There is no design defect with
respect to any of such products and each of such products contains adequate
warnings, presented in a reasonably prominent manner, in accordance with
Applicable Law and current industry practice with respect to its contents and
use.
Section 4.23. Properties. (a) The Company and each of its Subsidiaries has
good and marketable title to, or in the case of leased property and leased
tangible assets, valid leasehold interests in, all of its material properties
and material tangible assets. All such assets and properties, other than assets
and properties in which the Company or any of its Subsidiaries has leasehold
interests, are free and clear of all Liens.
(b) Section 4.23(b) of the Company Disclosure Schedule sets forth a
complete and correct list of all real or immovable property and interests in
real or immovable property owned by the Company or any of its Subsidiaries
(each, an "OWNED REAL PROPERTY").
(c) There are no developments affecting any Owned Real Property
pending or, to the Knowledge of the Company threatened, which might materially
detract from the value, materially interfere with any present or intended use or
materially adversely affect the marketability of any such property or assets.
31
(d) To the Knowledge of the Company, each Owned Real Property has no
material defects, is in good operating condition and repair and has been
reasonably maintained consistent with standards generally followed in the
industry (giving due account to the age and length of use of same, ordinary wear
and tear excepted), is adequate and suitable for their present uses and, in the
case of plants, buildings and other structures (including the roofs thereof),
are structurally sound.
(e) Each Owned Real Property currently has access to (i) public roads
or valid easements over private streets or private property for such ingress to
and egress from all such plants, buildings and structures and (ii) water supply,
storm and sanitary sewer facilities, telephone, gas and electrical connections,
fire protection, drainage and other public utilities, in each case as is
necessary for the conduct of the business of the Company or any Subsidiary as
heretofore conducted. To the Knowledge of the Company, none of the structures on
any Owned Real Property encroaches upon real property of another Person, and no
structure of any other Person substantially encroaches upon any such Owned Real
Property.
(f) Each Owned Real Property, and its continued use, occupancy and
operation as currently used, occupied and operated, does not constitute a
nonconforming use under all applicable building, zoning, subdivision and other
land use and similar Applicable Law.
(g) Section 4.23(g) of the Company Disclosure Schedule sets forth a
complete and correct list of all real or immovable property and interests in
real or immovable property leased by the Company or any of its Subsidiaries
(each, a "LEASED REAL PROPERTY").
(h) With respect to each Leased Real Property, neither the Company nor
any of its Subsidiaries has subleased, licensed or otherwise granted anyone the
right to use or occupy such Leased Real Property or any portion thereof. The
Company and each of its Subsidiaries enjoy peaceful and undisturbed possession
of the Leased Real Property.
(i) The Owned Real Properties and Leased Real Properties constitute
all of the real property used or held for use in connection with the businesses
of the Company or any Subsidiary and are adequate to conduct such businesses as
currently conducted.
Section 4.24. Certain Business Practices. Except as would not, individually
or in the aggregate, reasonably be expected to be material to the Company and
its Subsidiaries, taken as a whole, neither the Company nor any of its
Subsidiaries nor (to the Knowledge of the Company) any director, officer, agent
or employee of the Company or any of its Subsidiaries (i) used any funds for
unlawful contributions, gifts, entertainment or other expenses relating to
political activity or for the business of the Company or any of its Subsidiaries
or (ii) made any bribe or kickback, illegal political contribution, payment from
corporate funds which was incorrectly recorded on the books and records of the
Company or any of its Subsidiaries, unlawful payment from corporate funds to
foreign or domestic government officials or employees or to foreign or domestic
political parties or campaigns or violated any provision of the Foreign Corrupt
Practices Act of 1977, or (iii) made any other unlawful payment.
Section 4.25. Interested Party Transactions. Neither the Company nor any of
its Subsidiaries is a party to any transaction or agreement with any Affiliate,
shareholder that beneficially owns 5% or more of the Company's outstanding
common stock, or director or executive officer of the Company. No event has
occurred since the date of the Company's last proxy statement
32
for its annual meeting of stockholders that would be required to be reported by
the Company pursuant to Item 404 of Regulation S-K promulgated by the SEC.
Section 4.26. Antitakeover Statutes and Rights Agreement. (a) The Company
has taken all action necessary to exempt the Merger, this Agreement, the Voting
Agreements and the transactions contemplated hereby from Section 203 of Delaware
Law, and, accordingly, neither such Section nor any other antitakeover or
similar statute or regulation applies or purports to apply to any such
transactions. No other "control share acquisition," "fair price," "moratorium"
or other antitakeover laws enacted under U.S. state or federal laws apply to
this Agreement, the Voting Agreements or any of the transactions contemplated
hereby.
(b) The Company has taken all action necessary (i) to render the
Company Rights inapplicable to the Merger, this Agreement, the Voting Agreement
and the transactions contemplated hereby and thereby, and (ii) ensure that (A)
neither Parent, Merger Subsidiary nor any of their Affiliates will become an
"Acquiring Person" (as such term is defined in the Company Rights Agreement),
(B) none of a "SHARES ACQUISITION DATE", a "DISTRIBUTION DATE", or a "TRIGGERING
EVENT" (each as defined in the Company Rights Agreement) shall occur, and (C)
the Company Rights will not separate from the shares of Company Common Stock, in
each case, by reason of the approval or execution of this Agreement, the
announcement or consummation of the Merger, this Agreement, the Voting Agreement
or the transactions contemplated hereby and thereby.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBSIDIARY
Subject to such exceptions disclosed in the Parent Disclosure Schedule (it
being expressly understood and agreed that the disclosure of any fact or item in
any Section of the Parent Disclosure Schedule shall only be deemed to be an
exception to (or, as applicable, a disclosure for purposes of) (i) the
representations and warranties of Parent and Merger Subsidiary that are
contained in the corresponding Section of this Agreement and (ii) any other
representations and warranties of Parent or Merger Subsidiary that is contained
in this Agreement, but only if the relevance of that reference as an exception
to (or a disclosure for purposes of) such representations and warranties would
be readily apparent to a reasonable person who has read that reference and such
representations and warranties, without any independent knowledge on the part of
the reader regarding the matter(s) so disclosed, each of Parent and Merger
Subsidiary represents and warrants to the Company that:
Section 5.01. Corporate Existence and Power. Each of Parent and Merger
Subsidiary is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
corporate powers and all Permits required to carry on its business as now
conducted, except for those Permits the absence of which would not have,
individually or in the aggregate, a Parent Material Adverse Effect. Parent has
heretofore delivered to the Company true and complete copies of the certificate
of incorporation and bylaws of Parent and Merger Subsidiary as currently in
effect. Since the date of its incorporation, Merger Subsidiary has not engaged
in any activities other than in connection with or as contemplated by this
Agreement.
Section 5.02. Corporate Authorization. (a) The execution, delivery and
performance by Parent and Merger Subsidiary of this Agreement and the
consummation by Parent and Merger Subsidiary of the transactions contemplated
hereby are within the corporate powers of Parent and Merger Subsidiary and have
been duly authorized by all necessary corporate action. This Agreement
constitutes a valid and binding agreement of each of Parent and Merger
Subsidiary enforceable
33
against them in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, insolvency, fraudulent
conveyance or similar laws or by general principles of equity.
Section 5.03. Governmental Authorization. The execution, delivery and
performance by Parent and Merger Subsidiary of this Agreement and the
consummation by Parent and Merger Subsidiary of the transactions contemplated
hereby require no action by or in respect of, or filing with, any Governmental
Authority, other than (i) the filing of a certificate of merger with respect to
the Merger with the Delaware Secretary of State and appropriate documents with
the relevant authorities of other states in which Parent or Merger Subsidiary is
qualified to do business, (ii) compliance with any applicable requirements of
the HSR Act and of laws analogous to the HSR Act existing in foreign
jurisdictions, (iii) compliance with any applicable requirements of the 1934 Act
and any other U.S. state or federal securities laws and (iv) any actions or
filings the absence of which would not be reasonably expected to have,
individually or in the aggregate, a Parent Material Adverse Effect.
Section 5.04. Non-contravention. The execution, delivery and performance by
Parent and Merger Subsidiary of this Agreement and the consummation by Parent
and Merger Subsidiary of the transactions contemplated hereby do not and will
not require any consent or other action by any Person under, contravene,
conflict with, violate, breach or constitute a default under, or an event that,
with or without notice or lapse of time or both, could become a violation,
breach or default under, or cause or permit the termination, cancellation,
acceleration or other change of any right or obligation or the loss of any
benefit to which Parent or any of its Subsidiaries is entitled under any
provision of (a) the certificate of incorporation or bylaws of Parent or Merger
Subsidiary, (b) assuming compliance with the matters referred to in Section
5.03, any provisions of any Applicable Law, or (c) any agreement or other
instrument binding upon Parent or any of its Subsidiaries or any Permit
affecting, or relating in any way to, the assets or business of the Parent and
its Subsidiaries or, except in the case each of clauses (b) and (c), as would
not be reasonably expected to have, individually or in the aggregate, a Parent
Material Adverse Effect.
Section 5.05. Absence Of Litigation. As of the date of this Agreement,
there is no Action pending or, to the Knowledge of Parent, threatened, against
Parent or any of its Affiliates before any Governmental Authority that would or
seeks to materially delay or prevent the consummation of the Merger. As of the
date of this Agreement, neither Parent nor any of its Affiliates is subject to
any continuing Order of, consent decree, settlement agreement or other similar
written agreement with, or, to the Knowledge of Parent, continuing investigation
by, any Governmental Authority, or any Order that would or seeks to materially
delay or prevent the consummation of the Merger.
Section 5.06. Financing. Parent has provided to the Company true, accurate
and complete copies of (a) fully executed equity commitment letter, dated as of
the date of this Agreement, pursuant to which the Guarantor has committed to
provide or cause to be provided the cash amounts set forth therein to provide
equity financing to Parent and/or Merger Subsidiary (the "EQUITY COMMITMENT
LETTER"), and (b) a fully executed debt commitment letter, dated as of the date
of this Agreement (the "DEBT COMMITMENT LETTER" and together with the Equity
Commitment Letter, the "FINANCING COMMITMENTS") pursuant to which, and subject
to the terms and conditions thereof, the lenders party thereto have committed to
provide Merger Subsidiary with loans in the amounts described therein, the
proceeds of which are to be used to consummate the Merger and the other
transactions contemplated hereby and pay related fees and expenses (the "DEBT
FINANCING" and together with the equity financing pursuant to the Equity
Commitment Letter, the "FINANCING").
34
Each of the Financing Commitments, in the form so delivered, is a legal, valid
and binding obligation of Parent and/or Merger Subsidiary, as applicable, and,
to Parent's Knowledge, the other parties thereto. As of this date of this
Agreement, the Financing Commitments are in full force and effect and have not
been withdrawn, rescinded or terminated or otherwise amended or modified in any
respect. As of the date hereof, neither Parent nor Merger Subsidiary is in
default or breach under the terms of the Financing Commitments and, to the
Knowledge of Parent, no event or circumstance has occurred that, with notice or
lapse of time or both, would constitute any default or breach of the terms of
the Financing Commitments. Parent and/or Merger Subsidiary has fully paid any
and all commitment fees or other fees required by the Financing Commitments to
be paid on or before the date of this Agreement. Subject to its terms and
conditions, the Financing, when funded in accordance with the Financing
Commitments and together with the Company Cash Deposit, will provide Parent and
Merger Subsidiary with acquisition financing at the Effective Time sufficient to
consummate the Merger upon the terms contemplated by this Agreement. There are
no side letters or other agreements or arrangements relating to the Financing to
which Parent, Merger Subsidiary or any of their Affiliates are a party
containing additional conditions precedent to the Financing.
Section 5.07. Limited Guarantee. Concurrently with the execution of this
Agreement, Parent has caused the Guarantor to deliver to the Company the
executed Limited Guarantee. The Limited Guarantee is valid and in full force and
effect and constitutes the valid and binding obligation of the Guarantor,
enforceable in accordance with its terms.
Section 5.08. Disclosure Documents. None of the information provided by
Parent for inclusion in the Company Proxy Statement or any amendment or
supplement thereto, at the time the Company Proxy Statement or any amendment or
supplement thereto is first mailed to stockholders of the Company and at the
time the stockholders vote on adoption of this Agreement and at the Effective
Time, will contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading.
Section 5.09. Antitakeover Statutes. Neither Parent nor Merger Subsidiary
is an "interested stockholder" in the Company, as such term is defined in
Section 203 of the DGCL.
ARTICLE 6
COVENANTS OF THE COMPANY
The Company agrees that:
Section 6.01. Conduct of the Company. From the date hereof until the
Effective Time, the Company shall, and shall cause each of its Subsidiaries to,
conduct its business in the ordinary course consistent with past practice and,
to the extent consistent therewith, (i) preserve intact its present business
organization, (ii) maintain in effect all of its foreign, federal, state and
local Permits, (iii) keep available the services of its directors, officers and
key employees, (iv) maintain satisfactory relationships with its customers,
lenders, suppliers and others having material business relationships, and (v)
manage cash and working capital in the ordinary course of business consistent
with past practices. Without limiting the generality of the foregoing, except as
expressly contemplated by this Agreement or as set forth in Section 6.01 of the
Company Disclosure Schedule (with specific reference to the subsection of
Section 6.01 to which the disclosure relates), the Company shall not, nor shall
it permit any of its Subsidiaries to do any of the following without the prior
written consent of Parent:
35
(a) amend its certificate of incorporation, bylaws or other similar
organizational documents (whether by merger, consolidation or otherwise) or form
any Subsidiary;
(b) split, combine or reclassify any shares of capital stock of the
Company or any of its Subsidiaries or declare, set aside or pay any dividend or
other distribution (whether in cash, stock or property or any combination
thereof) in respect of the capital stock of the Company or its Subsidiaries, or
redeem, repurchase or otherwise acquire or offer to redeem, repurchase, or
otherwise acquire any Company Securities or any Company Subsidiary Securities;
(c) (i) issue, deliver or sell, or authorize the issuance, delivery or
sale of, any shares of any Company Securities or Company Subsidiary Securities,
other than the issuance of (A) any shares of the Company Stock upon the exercise
of Company Stock Options in the ordinary course of business consistent with past
practice that are outstanding on the date of this Agreement in accordance with
the terms of those options on the date of this Agreement and (B) any Company
Subsidiary Securities to the Company or any other Subsidiary in the ordinary
course of business consistent with past practice or (ii) amend any term of any
Company Security or any Company Subsidiary Security (in each case, whether by
merger, consolidation or otherwise);
(d) incur any capital expenditures or any obligations or liabilities
in respect thereof, in the aggregate greater than $500,000;
(e) acquire (by merger, consolidation, acquisition of stock or assets
or otherwise), directly or indirectly, (i) any business or Person or division
thereof, or (ii) any material amount of assets other than in the ordinary course
of business consistent with past practice;
(f) sell, lease, license, sell and lease-back, mortgage or otherwise
transfer or grant rights in, or create or incur any Lien on, any of the
Company's or its Subsidiaries' assets, Company-Owned IP, securities, properties,
interests or businesses, other than sales of inventory in the ordinary course of
business consistent with past practice;
(g) other than in connection with actions permitted by Section 6.01(d)
or Section 6.01(e), make any loans, advances or capital contributions to, or
investments in, any other Person, other than the Company or any of its
Subsidiaries in the ordinary course of business consistent with past practice;
(h) create, incur, assume, suffer to exist or otherwise be liable with
respect to any Indebtedness, or take any action that would result in any
amendment, modification or change of any term of any Indebtedness of the Company
or any of its Subsidiaries;
(i) (i) enter into, amend or modify in any material respect or
terminate any Material Contract, (ii) waive, release or assign any material
rights, claims or benefits of the Company or any of its Subsidiaries, or (iii)
waive any material benefits of, or agree to modify in any adverse respect, or
fail to enforce, or consent to any matter with respect to which its consent is
required under, any confidentiality, standstill or similar Contract;
(j) (i) grant or increase any severance or termination pay to (or
amend any existing arrangement with) any director, officer or employee of the
Company or any of its Subsidiaries, other than that undertaken in the normal
course of business consistent with past practices, (ii) increase benefits
payable under any existing severance or termination pay policies or
36
employment agreements, (iii) enter into any employment, deferred compensation or
other similar agreement (or amend any such existing agreement) with any current
director, officer or employee of the Company or any of its Subsidiaries, other
than that undertaken in the normal course of business consistent with past
practices, (iv) establish, adopt or amend (except as required by Applicable Law)
any collective bargaining, bonus, profit-sharing, thrift, pension, retirement,
deferred compensation, compensation, stock option, restricted stock or other
benefit plan or arrangement covering any director, officer or employee of the
Company or any of its Subsidiaries or (v) increase compensation, bonus or other
benefits payable to any director, officer or employee of the Company or any of
its Subsidiaries other than employee raises undertaken in the normal course of
business consistent with past practices;
(k) write down any of its material assets or change the Company's
methods of accounting, except (i) as required by concurrent changes in GAAP (as
interpreted by the Company's independent public accountants) or Applicable Law,
(ii) as required by a Governmental Authority or quasi-Governmental Authority
(including the Financial Accounting Standards Board ("FASB") or any similar
organization) or (iii) as disclosed in the Company SEC Documents filed prior to
the date hereof;
(l) settle, or offer or propose to settle, (i) any Proceeding or other
claim involving or against the Company or any of its Subsidiaries (other than
the settlement of immaterial claims in the ordinary course of business
consistent with past practice which does not include any obligation to be
performed by the Company or any of its Subsidiaries (other than the payment of
money) after the Effective Time or the settlement of claims reserved against on
the Company Balance Sheet), (ii) any stockholder litigation or dispute against
the Company or any of its officers or directors or (iii) any Proceeding or
dispute that relates to the transactions contemplated hereby;
(m) make or change any Tax election (other than in the ordinary course
of business), change any annual tax accounting period, adopt or change any
method of tax accounting (other than in the ordinary course of business), amend
any Tax Returns or file claims for Tax refunds, enter into any closing agreement
or other agreement with a Taxing Authority, settle any Tax claim, audit or
assessment, surrender any right to claim a Tax refund, offset or other reduction
in Tax liability, or consent to any extension or waiver of the limitations
period applicable to any Tax claim or assessment;
(n) enter into any Contract containing any "change of control" or
similar provision requiring consent or granting a termination right or
acceleration of any rights in connection with transactions similar to the Merger
and the transactions contemplated by this Agreement (unless such restriction
expressly excludes the Merger and the transactions contemplated by this
Agreement from such provision);
(o) (i) take any action that would reasonably be likely to prevent or
materially delay, or omit to take any action necessary to cause, satisfaction of
the conditions contained in Sections 9.01 or 9.02 or the consummation of the
Merger, or (ii) take any action that would result in a Company Material Adverse
Effect;
(p) change cash or working capital management, including, without
limitation, accelerate the collection of receivables or defer the payment of
current liabilities; or
(q) agree, resolve or commit to do any of the foregoing.
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Section 6.02. Stockholder Meeting; Proxy Material.
(a) The Company shall, as promptly as practicable following the date
hereof, establish a record date for, duly call, give notice of, convene and hold
a meeting of its stockholders (the "COMPANY STOCKHOLDER MEETING") for the
purpose of obtaining the Company Stockholder Approval; provided that the Company
may delay the Company Stockholder Meeting to the extent (and only to the extent)
the Company reasonably determines that such delay is (i) necessary to secure a
quorum, or (ii) required by Applicable Law to comply with any comments made by
the SEC with respect to the Proxy Statement or otherwise. The notice of such
Company Stockholder Meeting shall state that a resolution to adopt this
Agreement will be considered at the Company Stockholder Meeting. Subject to
Section 6.03(b), the Board of Directors of the Company shall recommend to
holders of the Company Stock that they adopt this Agreement, and shall include
such recommendation in the Company Proxy Statement. The Company shall use its
commercially reasonable efforts to satisfy the closing condition set forth in
Section 9.01(a) and otherwise comply with all legal requirements applicable to
the Company Stockholder Meeting.
(b) The Company shall, as promptly as practicable following the date
of this Agreement, prepare and file with the SEC the Company Proxy Statement.
The Company shall use its commercially reasonable efforts to cause the
definitive Company Proxy Statement to be cleared by the SEC, mailed to the
Company's stockholders as promptly as practicable after such filing. Each of the
Company and Parent shall furnish all information concerning such person to the
other as may be reasonably requested in connection with the preparation, filing
and distribution of the Company Proxy Statement. The Company shall promptly
notify Parent upon the receipt of any comments from the SEC or any request from
the SEC for amendments or supplements to the Company Proxy Statement and shall
provide Parent with copies of all correspondence between it and its
representatives, on the one hand, and the SEC, on the other hand. Each of the
Company and Parent shall use commercially reasonable efforts to respond as
promptly as practicable to any comments of the SEC with respect to the Company
Proxy Statement. Notwithstanding the foregoing, prior to filing or mailing the
Company Proxy Statement (or any amendment or supplement thereto) or responding
to any comments of the SEC with respect thereto, the Company (i) shall provide
Parent a reasonable opportunity to review and comment on such document or
response (including the proposed final version of such document or response),
(ii) shall include in such document or response all comments reasonably proposed
by Parent, and (iii) shall provide Parent and its counsel a reasonable
opportunity to participate in any discussions or meetings with the SEC. If, at
any time prior to the Stockholders Meeting, any information relating to the
Company, Parent or any of their respective affiliates, officers or directors
should be discovered by the Company or Parent which should be set forth in an
amendment or supplement to the Company Proxy Statement, so that the Company
Proxy Statement does not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
are made, not misleading, the party that discovers such information shall
promptly notify the other parties hereto, and an appropriate amendment or
supplement describing such information shall be filed with the SEC and, to the
extent required by Applicable Law, disseminated to the stockholders of the
Company.
Section 6.03. No Solicitation; Other Offers. (a) General Prohibitions.
Subject to Section 6.03(b), neither the Company nor any of its Subsidiaries
shall, nor shall the Company or any of its Subsidiaries authorize or permit any
of its or their officers, directors, employees, investment bankers, attorneys,
accountants, consultants or other agents or advisors to, directly or indirectly,
(i) solicit, initiate or take any action to facilitate or encourage the
submission of any Acquisition
38
Proposal, (ii) enter into or participate in any discussions or negotiations
with, furnish any information relating to the Company or any of its Subsidiaries
or afford access to the business, properties, assets, books or records of the
Company or any of its Subsidiaries to, otherwise cooperate in any way with, or
knowingly assist, participate in, facilitate or encourage any effort by any
Third Party that is seeking to make, or has made, an Acquisition Proposal, (iii)
fail to make, withdraw or modify in a manner adverse to Parent the Company Board
Recommendation (or recommend an Acquisition Proposal or take any action or make
any statement inconsistent with the Company Board Recommendation) (any of the
foregoing in this clause (iii), an "ADVERSE RECOMMENDATION CHANGE"), (iv) grant
any waiver or release under any standstill or similar agreement with respect to
any class of equity securities of the Company or any of its Subsidiaries, (iv)
approve any transaction under, or any Third Party becoming an "interested
stockholder" under, Section 203 of Delaware Law, (v) amend or grant any waiver
or release or approve any transaction or redeem any Company Rights under the
Company Rights Agreement, except in connection with the transactions
contemplated by this Agreement, or (vi) enter into any agreement in principle,
letter of intent, term sheet or other similar instrument relating to an
Acquisition Proposal.
(b) Exception to Permit Discussions and Due Diligence after Receipt of
Certain Proposals. Notwithstanding the foregoing, or anything else in this
Agreement, the Board of Directors or the Special Committee of the Company,
directly or indirectly through advisors, agents or other intermediaries, may (i)
engage in negotiations or discussions with any Third Party that, subject to the
Company's compliance with Section 6.03(a), has made a bona fide Acquisition
Proposal that the Board of Directors or the Special Committee of the Company
reasonably believes will lead to a Superior Proposal, (ii) thereafter furnish to
such Third Party nonpublic information relating to the Company or any of its
Subsidiaries pursuant to a confidentiality agreement with terms no less
favorable to the Company than those contained in the Confidentiality Agreement
dated as of May 16, 2007 between the Company and Parent (the "CONFIDENTIALITY
AGREEMENT"), (iii) following receipt of a Superior Proposal that has not been
withdrawn, subject to the Company's compliance with this Section 6.03, make an
Adverse Recommendation Change and/or (iv) take any action that any court of
competent jurisdiction orders the Company to take (which order shall have become
final and non-appealable), but in each case referred to in the foregoing clauses
(i) through (iv) only if the Board of Directors or the Special Committee of the
Company determines in good faith by a majority vote, after considering advice
from outside legal counsel, that the failure to take any such action would
reasonably be expected to result in a breach of its fiduciary duties under
Applicable Law. Nothing contained herein shall prevent the Board of Directors or
the Special Committee of the Company from complying with Rule 14d-9 and Rule
14e-2(a) under the 1934 Act with regard to an Acquisition Proposal, so long as
any action taken or statement made to so comply is consistent with this Section
6.03.
(c) Required Notices. The Board of Directors or the Special Committee
of the Company shall not take any of the actions referred to in clauses (i)
through (iv) of the preceding subsection unless the Company shall have delivered
to Parent a prior written notice advising Parent that it intends to take such
action, and the Company shall continue to advise Parent after taking such
action. In addition, the Company shall notify Parent promptly (but in no event
later than one (1) Business Day) after receipt by the Company (or any of its
advisors) of any Acquisition Proposal, any indication that a Third Party is
considering making an Acquisition Proposal or of any request for information
relating to the Company or any of its Subsidiaries or for access to the
business, properties, assets, books or records of the Company or any of its
Subsidiaries by any Third Party that may be considering making, or has made, an
Acquisition Proposal. The Company shall provide such notice orally and in
writing and shall identify the Third Party making, and the terms and conditions
39
of, any such Acquisition Proposal, indication or request. The Company shall keep
Parent reasonably informed, as promptly as practicable, of the status and
details of any such Acquisition Proposal, indication or request. The Company
shall keep Parent reasonably informed, on a prompt basis, of the status and
material terms of any such Acquisition Proposal, indication or request,
including any material amendments or proposed amendments as to price and other
material terms thereof. The Company shall provide Parent with at least
forty-eight (48) hours prior notice of any meeting of the Company Board (or such
lesser notice as is provided to the members of the Company Board) at which the
Company Board is reasonably expected to consider any Acquisition Proposal. The
Company shall promptly provide Parent with any non-public information concerning
the Company provided to any Third Party that was not previously provided to
Parent.
(d) Definition of Superior Proposal. For purposes of this Agreement,
"SUPERIOR PROPOSAL" means any bona fide, unsolicited written Acquisition
Proposal for seventy-five percent (75%) or more of the outstanding shares of
Company Stock on terms that the Board of Directors of the Company or the Special
Committee determines in good faith by a majority vote, after considering the
advice of a financial advisor of nationally recognized reputation and taking
into account all the terms and conditions of the Acquisition Proposal, including
any break-up fees, expense reimbursement provisions and conditions to
consummation, are more favorable and provide greater value to all the Company's
stockholders (other than the Continuing Stockholders) than as provided hereunder
and for which financing, if a cash transaction (whether in whole or in part), is
then fully committed or reasonably determined to be available by the Board of
Directors of the Company.
(e) Obligation to Terminate Existing Discussions. The Company shall,
and shall cause its Subsidiaries and Representatives to, cease immediately and
cause to be terminated any and all existing activities, discussions or
negotiations, if any, with any Third Party conducted prior to the date hereof
with respect to any Acquisition Proposal. The Company shall promptly request
that each Third Party, if any, that has executed a confidentiality agreement
within the 24-month period prior to the date hereof in connection with its
consideration of any Acquisition Proposal return or destroy all confidential
information heretofore furnished to such Person by or on behalf of the Company
or any of its Subsidiaries (and all analyses and other materials prepared by or
on behalf of such Person that contains, reflects or analyzes that information).
Section 6.04. Financing. The Company shall, and shall cause its
Subsidiaries to, provide such cooperation as may be reasonably requested by
Parent in connection with obtaining the Financing or any alternative financing
(including any alternative financing pursuant to Section 7.06), including: (i)
participation in meetings, drafting sessions, and due diligence sessions, and
otherwise assisting Parent in the preparation of offering materials and
materials for rating agency presentations; (ii) reasonably cooperating with the
marketing efforts of Parent, its Subsidiaries, and their financing sources for
any of the financing, including participation in management presentation
sessions, "road shows", and sessions with rating agencies; (iii) furnishing
Parent, its Subsidiaries, and their financing sources with financial and other
pertinent information regarding the Company as may be reasonably requested by
Parent, including all financial statements, and assisting Parent in the
preparation of business projections and other financial data of the type
required by Regulation S-X and Regulation S-K under the 1933 Act, and of the
type and form customarily included in offering memoranda, private placement
memoranda, prospectuses and similar documents; (iv) providing and executing
documents as may be reasonably requested by Parent, including a certificate of
the chief financial officer of the Company with respect to solvency matters and
consents of accountants for use of their reports in any materials relating to
the financing; (v) reasonably facilitating the pledging of collateral;
40
and (vi) using commercially reasonable efforts to obtain accountants' comfort
letters, legal opinions, surveys and title insurance as reasonably requested by
Parent.
Section 6.05. Exemption from Liability Under Section 16. Prior to the
Closing, the Company shall take all such steps as may be required to cause to be
exempt under Rule 16b-3 promulgated under the Exchange Act any dispositions of
Company Stock (including derivative securities with respect to Company Stock)
under such rule and resulting from the transactions contemplated by this
Agreement by each individual who is subject to the reporting requirements of
Section 16(a) of the Exchange Act with respect to the Company.
ARTICLE 7
COVENANTS OF PARENT
Section 7.01. Obligations of Merger Subsidiary. Parent shall take all
action necessary to cause Merger Subsidiary to perform its obligations under
this Agreement and to consummate the Merger on the terms and conditions set
forth in this Agreement.
Section 7.02. Voting of Shares. Parent shall vote all shares of Company
Stock beneficially owned by it or any of its Subsidiaries in favor of adoption
of this Agreement at the Company Stockholder Meeting.
Section 7.03. Information For Proxy Statement. Parent will furnish to the
Company such data and information relating to it and Merger Subsidiary as the
Company may reasonably request for the purpose of including such data and
information in the Proxy Statement and any amendments or supplements thereto.
Section 7.04. Director and Officer Liability. Parent shall cause the
Surviving Corporation, and the Surviving Corporation hereby agrees, to do the
following:
(a) After the Effective Time, the Surviving Corporation shall honor
and fulfill in all respects all obligations of the Company and its Subsidiaries
in respect of rights to indemnification, advancement of expenses and exculpation
from liabilities for acts or omissions occurring at or prior to the Effective
Time now existing in favor of the current or former directors or officers of the
Company and each of its Subsidiaries (each, an "INDEMNIFIED PERSON") as provided
in their respective certificates of incorporation or bylaws (or comparable
organizational documents) and any indemnification or other agreements of the
Company as in effect on the date of this Agreement and disclosed on Section
7.04(a) of the Company Disclosure Schedule; provided that such obligations shall
be subject to any limitation imposed from time to time under Applicable Law. In
furtherance and not in limitation of the foregoing, during the period commencing
at the Effective Time and ending on the sixth anniversary of the Effective Time,
the Surviving Corporation shall cause the certificate of incorporation and
bylaws (and other similar organizational documents) of the Surviving Corporation
and its Subsidiaries to contain provisions with respect to indemnification,
advancement of expenses and exculpation that are at least as favorable as the
indemnification, advancement of expenses and exculpation provisions contained in
the certificate of incorporation and bylaws (or other comparable organizational
documents) of the Company and its Subsidiaries as of
41
the date hereof, and during such six-year period, such provisions shall not be
repealed, amended or otherwise modified in any manner except as required by
Applicable Law.
(b) For six years after the Effective Time, the Surviving Corporation
shall provide officers' and directors' liability insurance in respect of acts or
omissions occurring prior to the Effective Time covering each such Indemnified
Person currently covered by the Company's officers' and directors' liability
insurance policy on terms with respect to coverage and amount no less favorable
than those of such policy in effect on the date hereof; provided that, in
satisfying its obligation under this Section 7.04(b), the Surviving Corporation
shall not be obligated to pay an aggregate premium in excess of 250% of the
amount per annum the Company paid in its last full fiscal year (the "ANNUAL
PREMIUM"), which amount is disclosed on Section 7.04(b) of the Company
Disclosure Schedule. Notwithstanding the foregoing, the Surviving Corporation
may acquire a six-year prepaid "tail" policy to the Company's existing
directors' and officers' liability insurance policy (which "tail" policy shall
contain the same terms and conditions as such existing policy) and in such
event, the Surviving Corporation shall maintain such "tail" policy in full force
and effect and continue to honor its obligations thereunder, in lieu of all
other obligations of the Surviving Corporation under the first sentence of this
7.04(b) for a six years after the Effective Time; provided that in no event
shall the Surviving Corporation be obligated to pay an amount for such "tail"
policy that in the aggregate exceeds 250% of the Annual Premium. Prior to the
Effective Time, notwithstanding anything to the contrary set forth in this
Agreement, at Parent's direction in its sole discretion, the Company shall
purchase at or immediately prior to the Effective Time a six-year prepaid "tail"
policy to its existing directors' and officers' liability insurance policy
(which "tail" policy shall contain the same terms and conditions as such
existing policy), and in such event, the Surviving Corporation shall maintain
such "tail" policy in full force and effect and continue to honor its
obligations thereunder, in lieu of all other obligations of the Surviving
Corporation under the first sentence of this 7.04(b) for a six years after the
Effective Time; provided that in no event shall the Company pay an amount for
such "tail" policy that in the aggregate exceeds 250% of the Annual Premium. In
the event that the costs for either (a) the aggregate premium payable by the
Surviving Corporation pursuant to the first sentence of this Section 7.04(b),
(b) a prepaid "tail-policy" purchased by the Surviving Corporation, or (c) a
prepaid "tail-policy" purchased by the Company exceed the applicable 250%
threshold, then the Surviving Corporation or the Corporation, if applicable,
shall be obligated to obtain a policy with the greatest coverage available for a
cost up to, but not exceeding such aggregated amount.
(c) The obligations set forth in this Section 7.04 shall not be
terminated, amended or otherwise modified in any manner that adversely affects
any Indemnified Person (or his or her heirs and his or her representatives)
without the prior written consent of such affected Indemnified Person (or his or
her heirs and his or her representatives). The provisions of this Section 7.04
(i) are intended to be for the benefit of, and will be enforceable by, each
indemnified party, his or her heirs and his or her representatives and (ii) 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.
(d) This Section 7.04 shall be binding on the Surviving Corporation
and its successors and assigns. In the event the Surviving Corporation or its
successor or assign (i) consolidates with or merges into any other person or
entity and shall not be the continuing or surviving corporation or entity in
such consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person or entity, then, and in each case, proper
provision shall be made so that the successor and assign of the Surviving
Corporation shall honor the obligations set forth with respect to the Surviving
Corporation in this Section 7.04.
42
Section 7.05. Employee Benefits; 401(k) Plan. From and after the Effective
Time, Parent will, or will cause the Surviving Corporation to recognize the
prior service with the Company or its Subsidiaries of each employee of the
Company or its Subsidiaries as of the Effective Time (the "Company Employees")
in connection with all employee benefit plans, programs or policies of Parent or
its affiliates in which Company Employees are eligible to participate following
the Effective Time, for purposes of eligibility, and, for vacation and severance
policies, levels of benefits. From and after the Effective Time, Parent will use
commercially reasonable efforts, or will cause the Surviving Corporation to use
commercially reasonable efforts, to cause any pre-existing conditions or
limitations and eligibility waiting periods (to the extent that such waiting
periods would be inapplicable, taking into account service with the Company)
under any group health plans of Parent or its affiliates to be waived with
respect to Company Employees and their eligible dependents.
Section 7.06. Financing Commitments. Parent and Merger Subsidiary shall use
their commercially reasonable efforts to take, or cause to be taken, all actions
and to do, or cause to be done, all things necessary, proper or advisable to
arrange and obtain the Financing on the terms and conditions described in the
Financing Commitments, including by using commercially reasonable efforts to (i)
maintain in effect the Financing Commitments, (ii) negotiate and enter into
definitive agreements with respect to the Financing Commitments on the terms and
conditions reflected in the Financing Commitments, (iii) satisfy on a timely
basis all conditions applicable to Parent and Sub Merger Subsidiary in such
definitive agreements that are within their control, and (iv) consummate the
Financing at or prior to Closing; provided that notwithstanding, and as an
alternative to, the foregoing, Parent and Merger Subsidiary may in any case
obtain alternative financing from alternative sources on terms that are not less
favorable, in the aggregate, to Parent and Subsidiary then the Financing
contemplated by the Financing Commitments ("NEW FINANCING COMMITMENTS");
provided further that any such New Financing Commitments shall not (A) expand or
adversely change in any material respect the conditions to the Financing set
forth in the Financing Commitments or (B) reasonably be expected to adversely
impact the ability of Parent and Merger Subsidiary to perform their respective
obligations under this Agreement. In any event, Parent shall disclose to the
Company its intention to obtain such New Financing Commitments, shall keep the
Company reasonably informed of the material terms thereof and shall deliver to
the Company final drafts of all documents relating to such New Financing
Commitments. Upon and from and after such event, the term "Financing" as used
herein shall be deemed to mean the Financing contemplated by the Financing
Commitments to the extent in effect at the time in question and the New
Financing Commitments to the extent then in effect. In the event any portion of
the Financing becomes unavailable on the terms and conditions contemplated in
the Financing Commitments for any reason, Parent shall give the Company prompt
notice and keep the Company reasonably informed on a reasonable basis and in
reasonable detail as set forth herein of the status of its commercially
reasonable efforts to arrange, as promptly as practicable following the
occurrence of such event, alternative financing from alternative sources on
terms that are not less favorable, in the aggregate, to Parent and Merger
Subsidiary then the Financing contemplated by the Financing Commitments.
Section 7.07. Solvency of the Surviving Corporation. If Parent or any of
its Affiliates obtains (on behalf or for the benefit of themselves or any other
Person) an opinion from an independent expert opining or supporting the
conclusion that, after giving effect to all of the transactions contemplated by
this Agreement and actions taken in connection with the financing (or any
Alternative Financing) thereof, Parent, the Surviving Corporation and/or any of
their Subsidiaries will be Solvent (or shall achieve or retain any similar or
equivalent financial status) (such opinion, the "SOLVENCY OPINION"), Parent
shall cause such independent expert to include the Company as an additional
addressee with respect to the Solvency Opinion entitled to rely thereon and
43
shall provide an executed copy of any such Solvency Opinion to the Company as
promptly as reasonably practicable after the issuance thereof, but in any event
prior to the Effective Time. For the purpose of clarity, nothing contained
herein shall obligate Parent or any of its Affiliates to obtain a Solvency
Opinion.
ARTICLE 8
COVENANTS OF PARENT, MERGER SUBSIDIARY AND THE COMPANY
The parties hereto agree that:
Section 8.01. Commercially Reasonable Efforts.
(a) Subject to the terms and conditions of this Agreement, the Company
and Parent shall use their commercially reasonable efforts to take, or cause to
be taken, all actions and to do, or cause to be done, all things necessary,
proper or advisable under Applicable Law to consummate the transactions
contemplated by this Agreement, including (i) preparing and filing as promptly
as practicable with any Governmental Authority or other third party all
documentation to effect all necessary filings, notices, petitions, statements,
registrations, submissions of information, applications and other documents and
(ii) obtaining and maintaining all approvals, consents, registrations, Permits
and other authorizations and confirmations required to be obtained from any
Governmental Authority or other third party that are necessary, proper or
advisable to consummate the transactions contemplated by this Agreement;
provided that the parties hereto understand and agree that the commercially
reasonable efforts of any party hereto shall not be deemed to include (i)
entering into any settlement, undertaking, consent decree, stipulation or
agreement with any Governmental Authority in connection with the transactions
contemplated hereby or (ii) divesting or otherwise holding separate (including
by establishing a trust or otherwise), or taking any other action (or otherwise
agreeing to do any of the foregoing) with respect to any of its or the Surviving
Corporation's Subsidiaries or any of their respective Affiliates' businesses,
assets or properties.
(b) In furtherance and not in limitation of the foregoing, each of
Parent and the Company shall make an appropriate filing of a Notification and
Report Form pursuant to the HSR Act with respect to the transactions
contemplated hereby as promptly as practicable and in any event within 15
Business Days of the date hereof and to supply as promptly as practicable any
additional information and documentary material that may be requested pursuant
to the HSR Act and to take all other actions necessary to cause the expiration
or termination of the applicable waiting periods under the HSR Act as soon as
practicable.
Section 8.02. Certain Filings. The Company and Parent shall cooperate with
one another (i) in connection with the preparation of the Company Proxy
Statement, (ii) in determining whether any action by or in respect of, or filing
with, any Governmental Authority is required, or any actions, consents,
approvals or waivers are required to be obtained from parties to any material
contracts, in connection with the consummation of the transactions contemplated
by this Agreement and (iii) in taking such actions or making any such filings,
furnishing information required in connection therewith or with the Company
Proxy Statement and seeking timely to obtain any such actions, consents,
approvals or waivers.
44
Section 8.03. Public Announcements. The parties agree that the initial
press release to be issued with respect to the transactions contemplated by this
Agreement shall be in a form agreed to by the parties. Parent and Merger
Subsidiary, on the one hand, and the Company, on the other hand, further agree
that they shall consult with the other before issuing any other press releases,
making any public statements or other public communications, or holding any
press conferences or conference calls, in each case relating to this Agreement,
the Merger and the other transactions contemplated hereby, except as may be
required by Applicable Law, court process or any listing agreement with or rule
of any national securities exchange or association, in which case, Parent and
Merger Subsidiary, on the one hand, and the Company, on the other hand, shall
consult with each other to the extent reasonably practicable before issuing any
such press release, making any such public statements or other public
communications, or holding any such press conference or conference call.
Section 8.04. Further Assurances. At and after the Effective Time, the
officers and directors of the Surviving Corporation shall be authorized to
execute and deliver, in the name and on behalf of the Company or Merger
Subsidiary, any deeds, bills of sale, assignments or assurances and to take and
do, in the name and on behalf of the Company or Merger Subsidiary, any other
actions and things to vest, perfect or confirm of record or otherwise in the
Surviving Corporation any and all right, title and interest in, to and under any
of the rights, properties or assets of the Company acquired or to be acquired by
the Surviving Corporation as a result of, or in connection with, the Merger.
Section 8.05. Access to Information. From the date hereof until the
Effective Time and subject to Applicable Law and the Confidentiality Agreement,
the Company shall (i) give to Parent, its counsel, financial advisors, auditors,
and other authorized representatives and Parent's financing sources and their
counsel and authorized representatives reasonable access to its offices,
properties, books and records, (ii) furnish to Parent, its counsel, financial
advisors, auditors and other authorized representatives and to Parent's
financing sources and their counsel and authorized representatives such
financial and operating data and other information as such Persons may
reasonably request and (iii) instruct its and its Subsidiaries' employees,
counsel, financial advisors, auditors and other authorized representatives to
cooperate with Parent and Parent's financing sources in their investigation. Any
investigation pursuant to this Section shall be conducted in such manner as not
to interfere unreasonably with the conduct of the business of the Company. No
information or knowledge obtained in any investigation pursuant to this Section
shall affect or be deemed to modify any representation or warranty made by any
party hereunder.
Section 8.06. Notices of Certain Events. Each of the Company and Parent
shall promptly notify the other of:
(a) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any Governmental Authority
in connection with the transactions contemplated by this Agreement;
(c) any actions, suits, claims, investigations or proceedings
commenced or, to its Knowledge, threatened against, relating to or involving or
otherwise affecting the Company or any of its Subsidiaries that, if pending on
the date of this Agreement, would have been required to have been
45
disclosed pursuant to Sections 4.12, 4.13, 4.16, 4.17, 4.18, 4.21 or 5.05, as
the case may be, or that relate to the consummation of the transactions
contemplated by this Agreement;
(d) it becoming aware of any inaccuracy of any representation or
warranty contained in this Agreement at any time during the term hereof that
could reasonably be expected to cause the conditions set forth in Section
9.02(a) or 9.03 not to be satisfied; and
(e) any failure of that party to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied in all material respects
by it hereunder;
provided, however, that the delivery of any notice pursuant to this Section 8.06
shall not limit or otherwise affect the remedies available hereunder to the
party receiving that notice.
Section 8.07. Delisting. Each of Parent and the Company agree to cooperate
with the other party in taking, or causing to be taken, all actions necessary
(i) to delist the Company Stock from the NASDAQ Global Market and (ii) to
terminate the registration of the Company Stock under the Exchange Act; provided
that such delisting and termination shall not be effective until or after the
Effective Time.
Section 8.08. Litigation. Each of Parent, Merger Subsidiary and the Company
agrees to use its commercially reasonable efforts to defend any lawsuits or
other legal proceedings against, whether judicial or administrative,
challenging, or seeking damages or other relief as a result of, the Merger, this
Agreement or the transactions contemplated hereby (including any stockholder
litigation against the Company or its directors or officers relating to any of
the transactions contemplated hereby), including seeking to have any order
adversely affecting the ability of the parties to consummate the transactions
contemplated hereby entered by any court or other Governmental Entity promptly
vacated or reversed. The Company shall not enter into any settlement agreement
with respect to any such lawsuit or legal proceeding without Parent's prior
consent.
Section 8.09. Environmental Reports.
(a) Parent and the Company have jointly retained the Environmental
Consultants to conduct Phase I Environmental Site Assessments with respect to
the Current Sites; provided, however, that the Environmental Consultant for the
Company's current California manufacturing facility shall be retained by the
Potential Mortgage Lender. Parent and the Company shall cause the Environmental
Consultants retained by Parent and the Company (and Parent shall use its
commercially reasonable efforts to cause any Environmental Consultant retained
by the Potential Mortgage Lender) to interact with and provide their analyses
and assessments (including all reports) (the "ENVIRONMENTAL REPORTS") to both
the Company and the Parent.
(b) If the Environmental Reports identify reasonably likely potential
costs of remediation (including fees likely to be assessed by Governmental
Authorities), claims, violations, damages, losses or diminution of property
value (excluding any costs to repair any structural damage arising out of the
matters set forth on Section 4.13 of the Company Disclosure Schedule) in the
amount of $2,000,000 or more in the aggregate with respect to the Current Sites
(a "SIGNIFICANT ENVIRONMENTAL MATTER"), Parent may, in its sole discretion, by
notice in writing delivered to the Company no later than 5:00 p.m. on the date
(the "NOTICE DATE") that is the earlier of (i) three calendar days after the
date on which Parent and the Company receive final copies of the Environmental
Reports and (ii) October 31, 2007, elect to notify the Company that the
46
Environmental Reports are not acceptable to Parent and terminate this Agreement
pursuant to Section 10.01(c)(vi) (a "PARENT ENVIRONMENTAL TERMINATION NOTICE").
If Parent does not deliver to the Company the Parent Environmental Termination
Notice by the Notice Date, the condition contained in Section 9.02(g) of this
Agreement shall be deemed satisfied and Parent's right to terminate pursuant to
Section 10.01(c)(vi) shall expire.
(c) If the Environmental Reports reveal no Significant Environmental
Matter, the condition contained in Section 9.02(g) shall be deemed satisfied and
Parent's right to terminate pursuant to Section 10.01(c)(vi) shall expire.
(d) The Company shall, and shall cause its Subsidiaries and it and is
Subsidiaries' respective employees, counsel, financial advisors, auditors and
other authorized representatives to, cooperate with Parent, Parent's lender and
the Environmental Consultants in conducting the Phase I Environmental Site
Assessments.
(e) For the purpose of this Section 8.09, "PHASE I ENVIRONMENTAL SITE
ASSESSMENT" means an environmental assessment that is consistent with or
generally equivalent to ASTM (American Society of Testing and Materials)
E1527-05 including identification of all on-site and off-site environmental
issues that could reasonably be expected to result in liabilities or compliance
costs in excess of $50,000.
Section 8.10. Working Capital Statements. From and after the date hereof
until the Effective Time, as soon as reasonably practicable after the close of
each fiscal month, the Company shall deliver to Parent an unaudited statement
(the "WORKING CAPITAL STATEMENT") setting forth the Company's Working Capital as
of the close of business on last day of such fiscal month. In the month in which
the Closing is expected to occur, the Company shall prepare an adjusted Working
Capital Statement (an "ADJUSTED WORKING CAPITAL STATEMENT") as promptly as
reasonably practicable after the close of the prior fiscal month, which Adjusted
Working Capital Statement shall reflect Working Capital as adjusted to (x)
subtract from Working Capital the amount by which the aggregate Company
Transaction Costs (whether or not paid) exceed $2,000,000 and (y) add to Working
Capital the amount of Company Transaction Costs that have been paid by the
Company and that are not included as prepaid expenses in Current Assets,
together with supporting invoices (Working Capital as so adjusted, the "ADJUSTED
WORKING CAPITAL"). The Working Capital Statements and the Final Working Capital
Statement shall be prepared in good faith and be accompanied by a certificate
executed by the Chief Financial Officer of the Company stating that such
statements were prepared in good faith.
ARTICLE 9
CONDITIONS TO THE MERGER
Section 9.01. Conditions to the Obligations of Each Party. The obligations
of the Company, Parent and Merger Subsidiary to consummate the Merger are
subject to the satisfaction of the following conditions:
(a) this Agreement and the Merger shall have received the Company
Stockholder Approval;
(b) no Applicable Law shall prohibit the consummation of the Merger;
and
47
(c) any applicable waiting period under the HSR Act or under laws
analogous to the HSR Act existing in foreign jurisdictions relating to the
Merger shall have expired or been terminated with respect to the acquisition of
the Company.
Section 9.02. Conditions to the Obligations of Parent and Merger
Subsidiary. The obligations of Parent and Merger Subsidiary to consummate the
Merger are subject to the satisfaction of the following further conditions:
(a) (i) the Company shall have performed in all material respects all
of its obligations hereunder required to be performed by it at or prior to the
closing date, (ii) (A) the representations and warranties of the Company
contained in Sections 4.02, 4.05 and 4.14 shall be true and correct at and as of
the date hereof and at and as of the Closing Date as if made at and as of the
Closing Date (except for those representations and warranties which address
matters only as of an earlier date which shall have been true and correct as of
such earlier date), (B) the other representations and warranties set contained
in Article 4 (disregarding for these purposes any exception in such
representations and warranties relating to materiality or a Material Adverse
Effect) shall be true and correct at and as of the date hereof and at and as of
the Closing Date as if made at and as of the Closing Date (except for those
representations and warranties which address matters only as of an earlier date
which shall have been true and correct as of such earlier date), except in the
case of this clause (B) for such failures to be true and correct which have not
had and would not have, individually or in the aggregate, a Material Adverse
Effect; and (iii) Parent shall have received a certificate signed by the Chief
Executive Officer of the Company to the foregoing effect;
(b) there shall not have been instituted or pending any action or
proceeding (or any investigation or other inquiry that could reasonably be
expected to result in such action or proceeding) by any Governmental Authority,
domestic, foreign or supranational, (i) challenging or seeking to make illegal,
to delay materially or otherwise directly or indirectly to restrain or prohibit
the consummation of the Merger or seeking to obtain material damages or
otherwise directly or indirectly relating to the transactions contemplated by
the Merger, (ii) seeking to restrain or prohibit Parent's, Merger Subsidiary's
or any of Parent's other Affiliates' (A) ability effectively to exercise full
rights of ownership of the Company Stock, including the right to vote any shares
of Company Stock acquired or owned by Parent, Merger Subsidiary or any of
Parent's other Affiliates following the Effective Time on all matters properly
presented to the Company's stockholders, or (B) ownership or operation (or that
of its respective Subsidiaries or Affiliates) of all or any material portion of
the business or assets of the Company and its Subsidiaries, taken as a whole, or
of Parent and its Subsidiaries, taken as a whole, or (iii) seeking to compel
Parent or any of its Subsidiaries or Affiliates to dispose of or hold separate
all or any material portion of the business or assets of the Company and its
Subsidiaries, taken as a whole, or of Parent and its Subsidiaries, taken as a
whole or (iv) that otherwise would be reasonably expected to have a Material
Adverse Effect on the Company or Parent;
(c) there shall not have been any action taken, or any Applicable Law
proposed, enacted, enforced, promulgated, issued or deemed applicable to the
Merger, by any Governmental Authority, other than the application of the waiting
period provisions of the HSR Act to the Merger and of laws analogous to the HSR
Act existing in foreign jurisdictions, that, in the reasonable judgment of
Parent, is likely, directly or indirectly, to result in any of the consequences
referred to in clauses (i) through (iv) of paragraph (b) above;
48
(d) since the date of this Agreement, there shall not have occurred
and be continuing as of or otherwise arisen before the Effective Time any event,
occurrence or development of a state of circumstances or facts which,
individually or in the aggregate, has had or could have a Material Adverse
Effect on the Company;
(e) (i) the Company shall have (i) Freely Available Cash at least
equal to the amount of the Company Cash Deposit; (ii) have made the Company Cash
Deposit using such Freely Available Cash in accordance with Section 2.03; and
(iii) Parent shall have received a certificate signed by the Chief Financial
Officer of the Company to the foregoing effect;
(f) (i) if the Closing Date occurs (A) during the Company's fiscal
November 2007 month, then the Company, as of the close of its fiscal October
2007 month, will have unaudited Adjusted Working Capital of not less than
$44,650,000, which shall be reflected in the Adjusted Working Capital Statement
for the October fiscal month, (B) during the Company's fiscal December 2007
month, then the Company, as of the close of its fiscal November 2007 month, will
have unaudited Adjusted Working Capital of not less than $45,126,000, which
shall be reflected in the Adjusted Working Capital Statement for the November
fiscal month, (C) during the Company's fiscal January 2008 month, then the
Company, as of the close of its fiscal December 2007 month, will have unaudited
Adjusted Working Capital amount of not less than $48,300,000, which shall be
reflected in the Adjusted Working Capital Statement for the December fiscal
month, (D) during the Company's fiscal February 2008 month, then the Company, as
of the close of its fiscal January 2008 month, will have unaudited Adjusted
Working Capital amount of not less than $48,300,000, which shall be reflected in
the Adjusted Working Capital Statement for the January fiscal month, (E) during
the Company's fiscal March 2008 month, then the Company, as of the close of its
fiscal February 2008, will have unaudited Adjusted Working Capital amount of not
less than $48,300,000, which shall be reflected in the Adjusted Working Capital
Statement for the February fiscal month, and (F) after the close of the
Company's fiscal March 2008 month, then the Company, as of the close of its
fiscal March 2008, will have unaudited Adjusted Working Capital of not less than
$48,300,000, which shall be reflected in the Adjusted Working Capital Statement
for the March fiscal month, and (ii) Parent shall have received a certificate
signed by the Chief Financial Officer of the Company to the foregoing effect.
(g) Parent shall have received a certificate in the form contemplated
by Section 897 of the Code and the regulations thereunder, signed by the
Company, to the effect that the Company is not and has not been within five (5)
years of the date of the certificate a "United States real property holding
corporation" within the meaning of Section 897 of the Code; and
(h) No Parent Environmental Termination Notice shall have been timely
delivered in accordance with Section 8.09 of this Agreement.
Section 9.03. Conditions to the Obligations of the Company. The obligations
of the Company to consummate the Merger are subject to the satisfaction of the
following further conditions: (a) each of Parent and Merger Subsidiary shall
have performed all of its obligations hereunder required to be performed by it
at or prior to the Effective Time; (b) the representations and warranties of
Parent contained in this Agreement and in any certificate or other writing
delivered by Parent pursuant hereto shall be true at and as of the Effective
Time as if made at and as of such time, except in the case of this clause (b)
for such failures to be true which have not had and would not have, individually
or in the aggregate, a Parent Material Adverse Effect; and (c) the Company shall
have received a certificate signed by the President of Parent to the foregoing
effect.
49
ARTICLE 10
TERMINATION
Section 10.01. Termination. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time (notwithstanding any
approval of this Agreement by the stockholders of the Company):
(a) by mutual written agreement of the Company and Parent;
(b) by either the Company or Parent, if:
(i) the Merger has not been consummated on or before April 1,
2008 (the "END DATE"); provided that the right to terminate this Agreement
pursuant to this Section 10.01(b)(i) shall not be available to any party whose
breach of any provision of this Agreement results in the failure of the Merger
to be consummated by such time;
(ii) there shall be any Applicable Law that (A) makes
consummation of the Merger illegal or otherwise prohibited or (B) enjoins the
Company or Parent from consummating the Merger and such enjoinment shall have
become final and nonappealable; or
(iii) at the Company Stockholder Meeting (including any
adjournment or postponement thereof), the Company Stockholder Approval shall not
have been obtained; or
(c) by Parent, if:
(i) an Adverse Recommendation Change shall have occurred;
(ii) the Company shall have entered into, or publicly announced
its intention to enter into, a definitive agreement or an agreement in principle
with respect to a Superior Proposal;
(iii) a breach of any representation or warranty or failure to
perform any covenant or agreement on the part of the Company set forth in this
Agreement shall have occurred that would cause the condition set forth in
Section 9.02(a) not to be satisfied, and such condition is incapable of being
satisfied by the End Date, or if capable of being cured by the Company by the
End Date, the Company does not cure such breach or failure within 30 days after
its receipt of written notice thereof from Parent; provided, however such 30-day
cure period shall not apply to the Company's obligation to close the Merger
which shall be governed by Section 2.01(b);
(iv) at any time after receipt or public announcement of an
Acquisition Proposal, the Company's Board of Directors shall have failed to
reaffirm the Company Board Recommendation as promptly as practicable (but in any
event within five (5) business days) after receipt of any written request to do
so from Parent;
(v) the Company shall have willfully and materially breached any
of its obligations under Section 6.02 or Section 6.03; or
(vi) the Environmental Reports identify a Significant
Environmental Matter that Parent determines is unacceptable and timely delivers
a Parent Environmental Termination Notice in accordance with Section 8.09 of
this Agreement; or
50
(d) by the Company:
(i) subject to complying with the terms of this Agreement, to
promptly enter into a binding written agreement concerning a Superior Proposal;
provided, that the Company shall have paid any amounts due pursuant to Section
11.04(b) in accordance with the terms, and at the times, specified therein; and
provided, further, that, in the case of any such termination by the Company, (A)
the Company notifies Parent, in writing and at least five Business Days prior to
such termination, of its intention to terminate this Agreement and to enter into
a binding written agreement concerning an Acquisition Proposal that constitutes
a Superior Proposal, attaching the most current version of such agreement, and
(B) Parent does not make, within five Business Days of receipt of such written
notification, an offer that is at least as favorable to the stockholders of the
Company as such Superior Proposal, it being understood that the Company shall
not enter into any such binding agreement during such five Business Day period;
it being further understood and agreed that any material amendment to any
Acquisition Proposal will be deemed to be a new Acquisition Proposal for
purposes of re-starting the five Business Day clock described in this Section;
or
(ii) if a breach of any representation or warranty or failure to
perform any covenant or agreement on the part of the Parent or Merger Subsidiary
set forth in this Agreement shall have occurred that would cause the condition
set forth in Section 9.03 not to be satisfied, and such condition is incapable
of being satisfied by the End Date, or if capable of being cured by Parent by
the End Date, Parent does not cure such breach or failure within 30 days after
its receipt of written notice thereof from the Company; provided that the 30-day
cure period shall not apply to Parent or Merger Subsidiary's obligation to close
the Merger which shall be governed by Section 2.01(b).
The party desiring to terminate this Agreement pursuant to this Section
10.01 (other than pursuant to Section 10.01(a)) shall give prior written notice
of such termination to the other party.
Section 10.02. Effect of Termination. If this Agreement is terminated
pursuant to Section 10.01, this Agreement shall become void and of no effect
without liability of any party (or any stockholder, director, officer, employee,
agent, consultant or representative of such party) to the other party hereto;
provided that the Company's right to receive payment of the Parent Termination
Fee from Parent (or from the Guarantor pursuant to the Limited Guarantee)
pursuant to Section 11.04(c) and to require that Parent, Merger Subsidiary and
the Guarantor perform their respective obligations under the Limited Guarantee
in accordance with the terms of the Limited Guarantee, the provisions of this
Section 10.02 and Sections 11.04, 11.07 and 11.08 shall survive any termination
hereof pursuant to Section 10.01; provided further that, except as provided in
Section 11.04(d), no such termination shall relieve any party hereto of any
liability or damages resulting from any willful or intentional breach of this
Agreement.
ARTICLE 11
MISCELLANEOUS
Section 11.01. Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including facsimile transmission) and
shall be given,
51
if to Parent or Merger Subsidiary, to:
Pioneer Holding Corp.
Pioneer Sub Corp.
c/o Vector Capital Corporation
456 Montgomery Street, 19th Floor
San Francisco, CA 94104
Attention: Amish Mehta
Facsimile No.: (415) 293-5100
with a copy to:
O'Melveny & Myers LLP
275 Battery Street, Suite 2600
San Francisco, California 94111
Attention: Steve L. Camahort,
Facsimile No.: (415) 984-8701
if to the Company, to:
Printronix, Inc.
14600 Myford Road
Irvine, CA 92606
Attention: Chief Financial Officer
Facsimile No.: (714) 368-2373
with a copy to:
Stradling Yocca Carlson & Rauth
660 Newport Center Drive, Suite 1600
Attention: K. C. Schaaf,
Michael Mulroy
Facsimile No.: (949) 725-4100
or to such other address or facsimile number address as such party may hereafter
specify for the purpose by notice to the other parties hereto. All such notices,
requests and other communications shall be deemed received on the date of
receipt by the recipient thereof if received prior to 5:00 p.m. on a Business
Day in the place of receipt. Otherwise, any such notice, request or
communication shall be deemed to have been received on the next succeeding
Business Day in the place of receipt.
Section 11.02. Survival of Representations and Warranties. The
representations, warranties and agreements contained herein and in any
certificate or other writing delivered pursuant hereto shall not survive the
Effective Time, except for the agreements set forth in Section 7.04.
Section 11.03. Amendments and Waivers. (a) Any provision of this Agreement
may be amended or waived prior to the Effective Time if, but only if, such
amendment or waiver is in writing and is signed, in the case of an amendment, by
each party to this Agreement or, in the case of a waiver, by each party against
whom the waiver is to be effective; provided that, after the Company Stockholder
Approval without their further approval, no such amendment or waiver shall
reduce the amount or change the kind of consideration to be received in exchange
for the shares of Company Stock.
52
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by Applicable Law.
Section 11.04. Expenses; Termination Fee. (a) Except as otherwise provided
herein, all costs and expenses incurred in connection with this Agreement shall
be paid by the party incurring such cost or expense; provided that Parent and
the Company shall each pay one half of the filing fee under the HSR Act, any
fees of filings under laws analogous to the HSR Act existing in foreign
jurisdictions and the expenses of the Environmental Consultants.
(b) If a Company Payment Event (as hereinafter defined) occurs, the
Company shall pay Parent (by wire transfer of immediately available funds), if,
pursuant to clause (i) of the definition of "Company Payment Event" below, at or
immediately prior to the occurrence of such Company Payment Event, if pursuant
to clause (ii) of the definition of "Company Payment Event" below, on the
Business Day immediately following the occurrence of such Company Payment Event
or, if pursuant to clause (iii) of the definition of "Company Payment Event"
below, within two Business Days following such Company Payment Event, a fee of
four million two hundred thousand dollars ($4,200,000).
"COMPANY PAYMENT EVENT" means (i) the termination of this Agreement
pursuant to Section 10.01(d)(i), (ii) the termination of this Agreement pursuant
to Section 10.01(c)(i), 10.01(c)(ii), 10.01(c)(iv) or 10.01(c)(v), or (iii) the
termination of this Agreement pursuant to Section 10.01(b)(i) or 10.01(b)(iii)
but, in the case of this clause (iii), only if and when (A) prior to the Company
Stockholder Meeting (in the case of a termination pursuant to Section
10.01(b)(iii)) or the End Date (in the case of a termination pursuant to Section
10.01(b)(i)), an Acquisition Proposal shall have been made by a Third Party, and
(B) within 12 months following the date of such termination the Company enters
into an agreement providing for an Acquisition Proposal which Acquisition
Proposal is subsequently consummated or an Acquisition Proposal is subsequently
consummated. For purposes of this definition of "Company Payment Event," all
references to "15%" in the definition of "Acquisition Proposal" shall be deemed
references to 50%.
(c) If a Parent Payment Event (as hereinafter defined) occurs, Parent
shall pay the Company (by wire transfer of immediately available funds), two
Business Days immediately following the occurrence of such Payment Event, an
amount equal to $5,000,000 (the "PARENT TERMINATION FEE").
(d) "PARENT PAYMENT EVENT" means (i) the termination of this Agreement
pursuant to Section 10.01(b)(i) if all of the conditions to Closing set forth in
Sections 9.01 and 9.02 were satisfied at the End Date or (ii) the termination of
this Agreement pursuant to Section 10.01(d)(ii) at a time when Parent is not
entitled to deliver a termination notice pursuant to Section 10.1(c)(iii).The
Company agrees that (i) to the extent it has incurred losses or damages in
connection with this Agreement (including as a result of a failure by Parent or
Merger Subsidiary to effect the Merger), the Company's sole and exclusive remedy
against Parent, Merger Subsidiary, the Guarantor and any of their respective
former, current and future direct or indirect equity holders, controlling
persons, stockholders, directors, officers, employee, agents, affiliates,
members, managers, general or limited partners or assignees (the "PARENT
PARTIES") for any breach, loss or damage shall be to receive payment of the
Parent Termination Fee to the extent provided in
53
Section 11.04(c) or the guarantee thereof pursuant to the Limited Guarantee and
to require the Guarantor to perform its obligations under the Guarantee in
accordance with its terms, (ii) no person shall have any other rights or claims
or seek damages against any of the Parent Parties under this Agreement, the
Limited Guarantee or the Financing Commitments, whether at law or equity, in
contract, in tort or otherwise, none of the Parent Parties shall have any
liability or obligations relating to or arising out of this Agreement or the
transactions contemplated by this Agreement, and (iii) the maximum liability of
the Guarantor, directly or indirectly, shall be limited to the express
obligations of the Guarantor under the Limited Guarantee. Nothing herein shall
relieve Parent or Merger Subsidiary of liability to pay for Company Stock in the
event the Merger is consummated. The provisions of this Section 11.4(d) are
intended to be for the benefit of, and will be enforceable by, each Parent
Party, his or her heirs and his or her representatives.
(e) The parties acknowledges that the agreements contained in this
Section 11.04 are an integral part of the transactions contemplated by this
Agreement and that, without these agreements, Parent and Merger Subsidiary, on
the one hand, and the Company on the other hand, would not enter into this
Agreement. Accordingly, if the Company, on the one hand, or Parent and Merger
Subsidiary, on the other hand, fails promptly to pay any amount due to the other
pursuant to this Section 11.04, the party failing to pay such amount party shall
also pay any costs and expenses incurred by the other party in connection with a
legal action to enforce this Agreement that results in a judgment against such
the party failing to pay for such amount.
Section 11.05. Binding Effect; Benefit; Assignment. The provisions of this
Agreement shall be binding upon and, except as provided in Section 7.04 and
Section 11.04(d), shall inure to the benefit of the parties hereto and their
respective successors and assigns. Except as provided in Section 7.04 and
Section 11.04(d), no provision of this Agreement is intended to confer any
rights, benefits, remedies, obligations or liabilities hereunder upon any Person
other than the parties hereto and their respective successors and assigns. No
party may assign, delegate or otherwise transfer any of its rights or
obligations under this Agreement without the consent of each other party hereto;
provided that (a) Parent may assign, by written notice to the Company, its
rights and obligations pursuant to this Agreement to one of its Affiliates
(which Affiliate must (i) be an entity held by the same stockholders of Parent
in the same relative proportions, and (ii) have not conducted any prior
operations itself or through any of its Subsidiaries), in which event such
entity shall execute this Agreement and upon the effectiveness of such execution
all references in this Agreement to Parent shall be deemed references to such
entity, except that all representations and warranties with respect to Parent as
of the date of this Agreement shall be deemed representations and warranties
made with respect to such entity as of the date of assignment, and (b) Parent
may designate, by written notice to the Company, one of its Affiliates to act in
lieu of Merger Sub (which Affiliate must be (i) a wholly owned Subsidiary of
Parent or must be an entity held by the same stockholders of Parent in the in
the same relative proportions and (ii) have not conducted any prior operations
itself or through any of its Subsidiaries), in which event such entity shall
execute this Agreement and upon the effectiveness of such execution all
references in this Agreement to Merger Sub shall be deemed references to such
entity, except that all representations and warranties with respect to Merger
Sub as of the date of this Agreement shall be deemed representations and
warranties made with respect to such entity as of the date of designation.
Section 11.06. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the conflicts of law rules of such state. Notwithstanding anything in this
Section 11.06 or this Agreement to the Limited Guarantee and all rights and
obligations thereunder (including the right of the Company to enforce
54
the Limited Guarantee) shall be governed by New York law and shall be
enforceable only in the New York courts specified therein in accordance with the
terms thereof.
Section 11.07. Jurisdiction. The parties hereto agree that any suit, action
or proceeding seeking to enforce any provision of, or based on any matter
arising out of or in connection with, this Agreement or the transactions
contemplated hereby shall be brought in any federal court located in the State
of Delaware or any Delaware state court, and each of the parties hereby
irrevocably consents to the jurisdiction of such courts (and of the appropriate
appellate courts therefrom) in any such suit, action or proceeding and
irrevocably waives, to the fullest extent permitted by law, any objection that
it may now or hereafter have to the laying of the venue of any such suit, action
or proceeding in any such court or that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum. Process in
any such suit, action or proceeding may be served on any party anywhere in the
world, whether within or without the jurisdiction of any such court. Without
limiting the foregoing, each party agrees that service of process on such party
as provided in Section 11.01 shall be deemed effective service of process on
such party.
Section 11.08. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
Section 11.09. Counterparts; Effectiveness. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
a counterpart hereof signed by all of the other parties hereto. Until and unless
each party has received a counterpart hereof signed by the other party hereto,
this Agreement shall have no effect and no party shall have any right or
obligation hereunder (whether by virtue of any other oral or written agreement
or other communication).
Section 11.10. Entire Agreement. This Agreement and the Confidentiality
Agreement constitute the entire agreement between the parties with respect to
the subject matter of this Agreement and supersedes all prior agreements and
understandings, both oral and written, between the parties with respect to the
subject matter of this Agreement.
Section 11.11. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other Governmental Authority to be invalid, void or unenforceable, 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 so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such a determination, the parties shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner in order that the transactions
contemplated hereby be consummated as originally contemplated to the fullest
extent possible.
Section 11.12. Specific Performance. The parties hereto agree that
irreparable damage would occur to Parent and Merger Subsidiary if any provision
of this Agreement were not performed by the Company in accordance with the terms
hereof and that Parent and Merger Subsidiary shall be entitled to an injunction
or injunctions to prevent breaches of this Agreement by the Company or to
enforce specifically the performance of the terms and provisions hereof in any
federal court located
55
in the State of Delaware or any Delaware state court, in addition to any other
remedy to which Parent and Merger Subsidiary are entitled at law or in equity.
The parties hereto agree that irreparable damage would occur to the Company if
Parent or Merger Subsidiary fails to perform their obligations pursuant to
Section 11.04 in accordance with the terms thereof and the Company shall be
entitled to an injunction or injunctions to prevent breaches of Section 11.04 by
Parent or Merger Subsidiary or to enforce specifically the performance of the
terms and provisions of Section 11.04 in any federal court located in the State
of Delaware or any Delaware state court, in addition to any other remedy to
which the Company is entitled at law or in equity.
Section 11.13. Interpretation. The headings contained in this Agreement or
in any Exhibit or Schedule hereto and in the table of contents to this Agreement
are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement. Any capitalized terms used in any Schedule or
Exhibit but not otherwise defined therein, shall have the meaning as defined in
this Agreement. When a reference is made in this Agreement to an Article,
Section, clause, Exhibit or Schedule, such reference shall be to an Article,
Section or clause of, or an Exhibit or Schedule to, this Agreement unless
otherwise indicated. For all purposes hereof, the terms "include", "includes"
and "including" shall be deemed followed by the words "without limitation." The
words "hereof", "hereto", "hereby", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement. The definitions
contained in this Agreement are applicable to the singular as well as the plural
forms of such terms.
[The Remainder of this Page Intentionally Left Blank.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
PRINTRONIX, INC.
By: /s/ Robert A. Kleist
------------------------------------
Name: Robert A. Kleist
Title: Chief Executive Officer
PIONEER HOLDING CORP.
By: /s/ Alexander R. Slusky
------------------------------------
Name: Alexander R. Slusky
Title: President and Chief Executive
Officer
PIONEER SUB CORP.
By: /s/ Alexander R. Slusky
------------------------------------
Name: Alexander R. Slusky
Title: President and Chief Executive
Officer