Exhibit 2.1
Execution Copy
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
AX HOLDING CORP.
("Parent"),
AX ACQUISITION CORP.
a wholly-owned direct subsidiary of Parent
("Merger Sub"),
and
AEROFLEX INCORPORATED
(the "Company")
Dated as of May 25, 2007
TABLE OF CONTENTS
Page
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ARTICLE I The Merger 1
Section 1.01 The Merger 1
Section 1.02 Closing 2
Section 1.03 Effective Time 2
Section 1.04 Effect of the Merger 2
Section 1.05 Certificate of Incorporation; Bylaws 2
Section 1.06 Directors and Officers 2
ARTICLE II Conversion of Securities; Exchange of Certificates 3
Section 2.01 Conversion of Securities 3
Section 2.02 Surrender of Certificates 3
Section 2.03 Options 6
Section 2.04 Dissenting Shares 6
Section 2.05 Timing of Equity Rollover 7
ARTICLE III Representations and Warranties of the Company 7
Section 3.01 Organization and Qualification 8
Section 3.02 Certificate of Incorporation and Bylaws 8
Section 3.03 Capitalization 9
Section 3.04 Authority Relative to This Agreement 11
Section 3.05 No Conflict; Required Filings and Consents 11
Section 3.06 Permits; Compliance with Laws 12
Section 3.07 SEC Filings; Financial Statements; Undisclosed
Liabilities 14
Section 3.08 Affiliate Transactions 15
Section 3.09 Absence of Certain Changes or Events 15
Section 3.10 Absence of Litigation 15
Section 3.11 Employee Benefit Plans 16
Section 3.12 Labor and Employment Matters 18
Section 3.13 Real Property 19
Section 3.14 Intellectual Property 21
Section 3.15 Taxes 23
Section 3.16 Environmental Matters 25
Section 3.17 Specified Contracts 25
Section 3.18 Insurance 29
Section 3.19 Board Approval; Vote Required 29
Section 3.20 Company Stock Options 30
Section 3.21 Rights Agreement 30
Section 3.22 Relationships 31
Section 3.23 Opinion of Financial Advisors 31
Section 3.24 Brokers 31
Section 3.25 No Other Information 31
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ARTICLE IV Representations and Warranties of Parent and Merger Sub 31
Section 4.01 Corporate Organization 31
Section 4.02 Certificate of Incorporation and Bylaws 32
Section 4.03 Authority Relative to this Agreement 32
Section 4.04 No Conflict; Required Filings and Consents 32
Section 4.05 Absence of Litigation 33
Section 4.06 Operations of Merger Sub and Parent; Ownership of
Company Common Stock 33
Section 4.07 Financing 33
Section 4.08 Guarantees 34
Section 4.09 Brokers 34
Section 4.10 No Other Information 34
ARTICLE V Conduct of Business Pending the Merger 35
Section 5.01 Conduct of Business by the Company Pending the Merger 35
ARTICLE VI Covenants of the Parties 38
Section 6.01 Proxy Statement; Other Filings 38
Section 6.02 Company Stockholders' Meeting 40
Section 6.03 Access to Information; Confidentiality 40
Section 6.04 Acquisition Proposals 41
Section 6.05 Directors' and Officers' Indemnification and Insurance 45
Section 6.06 Employee Benefits Matters 47
Section 6.07 HSR Act Filing 48
Section 6.08 Notification of Certain Matters 50
Section 6.09 Financing 50
Section 6.10 Further Action; Reasonable Best Efforts 52
Section 6.11 Public Announcements 53
Section 6.12 Resignations 53
Section 6.13 Actions Regarding Anti-Takeover Statutes 54
Sectio n 6.14 Standstill Provisions 54
Section 6.15 Rights Plan 54
Section 6.16 Solvency Opinion 54
Section 6.17 Obligations of Merger Sub 54
ARTICLE VII Conditions to the Merger 54
Section 7.01 Conditions to the Obligations of Each Party 54
Section 7.02 Conditions to the Obligations of Parent and Merger Sub 55
Section 7.03 Conditions to the Obligations of the Company 56
ARTICLE VIII Termination 57
Section 8.01 Termination 57
Section 8.02 Effect of Termination 58
Section 8.03 Fees and Expenses; Termination Fees 58
ARTICLE IX General Provisions 60
Section 9.01 Non-Survival of Representations, Warranties and
Agreements 60
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Section 9.02 Notices 60
Section 9.03 Amendment 62
Section 9.04 Waiver 62
Section 9.05 Certain Definitions 62
Section 9.06 Severability 66
Section 9.07 Entire Agreement; Assignment 66
Section 9.08 No Third Party Beneficiaries 66
Section 9.09 Governing Law 66
Section 9.10 Sole and Exclusive Remedy; Specific Performance;
Submission to Jurisdiction; No Recourse 66
Section 9.11 Waiver of Jury Trial 68
Section 9.12 Headings 68
Section 9.13 Counterparts 68
EXHIBITS
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Exhibit A: Form of Guarantees
Exhibit B: Certificate of Incorporation
Exhibit C: Organizational Structure
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INDEX OF DEFINED TERMS
2007 Audited Financial Statements Section 6.03(a)
Acquisition Proposal Section 6.04(a)
Action Section 3.10
Active Subsidiary Section 9.05(a)
Affiliate Section 9.05(a)
Agreement Recitals
Alternative Financing Section 6.09
Antitrust Laws Section 6.07(b)
Balance Sheet Section 3.07(c)
Benchmark Premium Section 6.05(b)
beneficial owner Section 9.05(a)
business day Section 9.05(a)
Capitalization Date Section 3.03(a)
Certificate of Merger Section 1.03
Certificates Section 2.01(a)
Change in Board Recommendation Section 6.04(d)
Closing Section 1.02
Closing Date Section 1.02
Code Section 3.11(b)
Company Recitals
Company Board Recitals
Company Common Stock Section 2.01(a)
Company Disclosure Letter ARTICLE III
Company Material Adverse Effect Section 9.05(a)
Company Permits Section 3.06(a)
Company Preferred Stock Section 3.03(a)
Company Stock Option Plans Section 2.03(a)
Company Stock Options Section 2.03(a)
Company Stockholders' Meeting Section 6.02
Company Subsidiary Section 2.01(b)
Company Termination Fee Section 8.03(e)
Company's knowledge Section 9.05(a)
Computer Hardware Section 3.14(h)
Computer Software Section 3.14(f)
Confidentiality Agreements Section 6.03(c)
Contract Section 3.05(a)
control Section 9.05(a)
Copyright Office Section 3.14(b)
Cost Accounting Standards Section 3.17(d)
Debt Commitment Letters Section 4.07
Debt Financing Section 4.07
DGCL Section 1.01
Dissenting Shares Section 2.04(a)
Effective Time Section 1.03
Environmental Laws Section 9.05(a)
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Equity Commitment Letters Section 4.07
Equity Financing Section 4.07
ERISA Section 3.11(a)
ERISA Affiliate Section 3.11(b)
Exchange Act Section 3.05(a)
Exchange Fund Section 2.02(b)
Expenses Section 8.03(a)
Expiration Date Section 8.01(b)
Export Control Laws Section 3.06(c)
Financing Section 4.07
Financing Commitments Section 4.07
Form 10-K/A ARTICLE III
GAAP Section 3.07(b)
Government Contract Section 3.17(d)
Governmental Authority Section 3.05(b)
Guarantees Recitals
Guarantors Recitals
HSR Act Section 3.05(b)
Inactive Subsidiary Section 9.05(a)
Indebtedness Section 9.05(a)
Indemnified Parties Section 6.05(a)
Infringe Section 3.14(a)
Intellectual Property Section 3.14(f)
Investments Section 3.03(c)
IRS Section 3.11(a)
knowledge of the Company Section 9.05(a)
Law Section 3.05(a)
Leased Properties Section 3.13(b)
Leased Property Section 3.13(b)
Leases Section 3.13(b)
Liabilities Section 3.07(c)
Liens Section 9.05(a)
Materials of Environmental Concern Section 9.05(a)
Merger Recitals
Merger Consideration Section 2.01(a)
Merger Sub Recitals
Multiemployer Plan Section 3.11(b)
Multiple Employer Plan Section 3.11(b)
Other Filings Section 6.01(b)
Other Transactions Section 3.04
Owned Intellectual Property Section 3.14(c)
Owned Real Property Section 3.13(a)
Parent Recitals
Parent Disclosure Letter ARTICLE IV
Parent Termination Fee Section 8.03(e)
Paying Agent Section 2.02(a)
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Permitted Liens Section 3.13(b)
Person Section 9.05(a)
Plans Section 3.11(a)
Proxy Statement Section 3.05(b)
PTO Section 3.14(b)
Purchaser Welfare Benefit Plans Section 6.06(c)
Representatives Section 6.03(a)
Rights Plan Section 3.21
Rollover Commitment Section 9.05
Sarbanes-Oxley Act Section 3.06(e)
Scheduled Intellectual Property Section 3.14(b)
SEC Section 3.05(b)
SEC Reports Section 3.07(a)
Section 203 Section 3.19(a)
Section 262 Section 2.04(a)
Securities Act Section 3.07(a)
Series A Preferred Stock Section 3.03(a)
Shares Section 2.01(a)
Specified Contract Section 3.17(b)
Stockholder Approval Section 3.19(b)
subsidiaries Section 9.05(a)
subsidiary Section 9.05(a)
Superior Proposal Section 6.04(i)
Surviving Corporation Section 1.01
Tax Section 9.05(a)
Tax Returns Section 9.05(a)
Taxes Section 9.05(a)
Termination Date Section 8.01
WARN Act Section 3.12(b)
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AGREEMENT AND PLAN OF MERGER, dated as of May 25, 2007 (this
"Agreement"), by and among AX Holding Corp., a Delaware corporation ("Parent"),
AX Acquisition Corp., Inc., a Delaware corporation and a wholly-owned subsidiary
of Parent ("Merger Sub"), and Aeroflex Incorporated, a Delaware corporation (the
"Company"). Capitalized terms used without having been previously defined in
this Agreement are defined in the Section indicated for such capitalized terms
in the Index of Defined Terms.
WHEREAS, the board of directors of the Company (the "Company Board")
has (i) determined unanimously that the merger of Merger Sub with and into the
Company, upon the terms and provisions of, and subject to the conditions set
forth in, this Agreement (the "Merger") is advisable and in the best interests
of the Company's stockholders, (ii) approved this Agreement and the Merger and
the other transactions contemplated hereby and (iii) recommended approval and
adoption of this Agreement and the Merger by the Company's stockholders;
WHEREAS, the respective boards of directors of each of Parent and
Merger Sub deem it in the best interests of their respective stockholders to
consummate the Merger, and such boards of directors have approved this Agreement
and the Merger and declared the advisability of this Agreement and the Merger;
and
WHEREAS, concurrently with the execution of this Agreement, and as a
condition and inducement to the Company's willingness to enter into this
Agreement, each of The Veritas Capital Fund III, L.P., Golden Gate Private
Equity, Inc. and GS Direct, L.L.C. (together, the "Guarantors") has provided a
limited guarantee (together, the "Guarantees") in favor of the Company, in the
form attached hereto as Exhibit A.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, Parent, Merger Sub and the Company hereby
agree as follows:
ARTICLE I
THE MERGER
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Section 1.01 The Merger. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the General Corporation Law
of the State of Delaware (the "DGCL"), at the Effective Time, (a) Merger Sub
shall be merged with and into the Company and (b) the separate corporate
existence of Merger Sub shall cease and the Company shall continue as the
surviving corporation of the Merger (the "Surviving Corporation").
Section 1.02 Closing. Unless this Agreement shall have been terminated
in accordance with Section 8.01, and subject to the satisfaction or waiver of
the conditions set forth in ARTICLE VII, the closing of the Merger (the
"Closing") will take place at 10:00 a.m. (local time) at the offices of Schulte
Roth & Zabel LLP, 919 Third Avenue, New York, New York on the third business day
following the date on which the
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conditions set forth in Sections 7.01(a) and (b) are satisfied or waived in
accordance with this Agreement or at such other time, date or place as Parent
and the Company may agree; provided, that, if the conditions set forth in
ARTICLE VII have been satisfied but the Debt Financing shall not yet have been
obtained, then Parent, at its option, may postpone the Closing to two business
days prior to the Expiration Date in order to obtain the Debt Financing or
Alternative Financing (the date on which the Closing occurs, the "Closing
Date").
Section 1.03 Effective Time. Upon the terms and subject to the
conditions set forth in this Agreement, on the Closing Date, the parties hereto
shall file a certificate of merger (the "Certificate of Merger") in such form as
is required by, and executed and acknowledged in accordance with, the relevant
provisions of the DGCL. The Merger shall become effective at such date and time
as the Certificate of Merger is duly filed with the Secretary of State of the
State of Delaware or at such subsequent date and time as Merger Sub and the
Company shall agree and specify in the Certificate of Merger. The time at which
the Merger becomes effective is referred to in this Agreement as the "Effective
Time".
Section 1.04 Effect of the Merger. At and after the Effective Time, the
effects of the Merger shall be as provided in the DGCL, including Section 259
thereof.
Section 1.05 Certificate of Incorporation; Bylaws.
(a) At the Effective Time, the certificate of incorporation of
the Company, as in effect immediately prior to the Effective Time, shall be
amended as of the Effective Time to read in its entirety as set forth in Exhibit
B attached hereto and, as so amended, shall be the certificate of incorporation
of the Surviving Corporation until thereafter amended in accordance with the
provisions thereof and as provided by Law.
(b) At the Effective Time, the bylaws of Merger Sub, as in
effect immediately prior to the Effective Time, shall be the bylaws of the
Surviving Corporation until thereafter amended as provided by Law, the
certificate of incorporation of the Surviving Corporation and such bylaws.
Section 1.06 Directors and Officers. The directors of Merger Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the certificate of
incorporation and bylaws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, each to hold office in accordance with the
certificate of incorporation and bylaws of the Surviving Corporation, in each
case until their respective successors are duly elected or appointed and
qualified or until the earlier of their death, resignation or removal.
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ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
--------------------------------------------------
Section 2.01 Conversion of Securities. At the Effective Time, by virtue
of the Merger and without any action on the part of Parent, Merger Sub, the
Company or the holders of any of the following securities:
(a) Conversion of Company Common Stock. Each share of common
stock, par value $0.10 per share, of the Company (the "Company Common Stock";
all issued and outstanding shares of Company Common Stock being hereinafter
collectively referred to as the "Shares") issued and outstanding immediately
prior to the Effective Time (other than any Shares to be cancelled pursuant to
Section 2.01(b) and any Dissenting Shares) shall be cancelled and shall be
converted automatically into the right to receive $14.50 in cash, without
interest (the "Merger Consideration"), payable upon surrender, in the manner
provided in Section 2.02, of the certificate (the "Certificates") that formerly
evidenced such Share.
(b) Cancellation of Treasury Stock and Parent and Merger
Sub-Owned Stock. Each share of Company Common Stock held by the Company as
treasury stock, each share of Company Common Stock held by any direct or
indirect subsidiary of the Company (a "Company Subsidiary") and each share of
Company Common Stock owned by Parent, Merger Sub or any direct or indirect
subsidiary of Parent or Merger Sub (whether acquired pursuant to a Rollover
Commitment or otherwise) immediately prior to the Effective Time shall
automatically be cancelled and cease to exist without any conversion thereof and
no consideration shall be paid with respect thereto.
(c) Capital Stock of Merger Sub. Each share of common stock,
par value $0.01 per share, of Merger Sub issued and outstanding immediately
prior to the Effective Time shall be converted into and become one (1) validly
issued, fully paid and nonassessable share of common stock, par value $0.01 per
share, of the Surviving Corporation. Following the Effective Time, each
certificate evidencing ownership of shares of Merger Sub common stock shall
evidence ownership of such shares of the Surviving Corporation.
(d) Adjustments. If, between the date of this Agreement and
the Effective Time, the number of Shares is changed into a different number of
shares or a different class, by reason of any reclassification,
recapitalization, stock split, stock dividend, subdivision, combination,
exchange of shares, rights issuance or similar event, other than pursuant to the
Merger and in accordance with this Agreement, the Merger Consideration shall be
correspondingly adjusted, without duplication, to reflect such change.
Section 2.02 Surrender of Certificates.
(a) Paying Agent. Prior to the Effective Time, Parent shall
(i) select a bank or trust company, satisfactory to the Company in its
reasonable
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discretion, to act as the paying agent in the Merger (the "Paying Agent") and
(ii) enter into a paying agent agreement with the Paying Agent, the terms and
conditions of which are satisfactory to the Company in its reasonable
discretion.
(b) Exchange Fund. At the Effective Time, on the Closing Date,
Parent shall deposit (or cause to be deposited) funds with the Paying Agent in
amounts sufficient for the payment of the aggregate Merger Consideration payable
under Section 2.01(a). Such funds deposited with the Paying Agent are referred
to as the "Exchange Fund".
(c) Payment Procedures.
(i) Letter of Transmittal. As promptly as practicable
after the Effective Time, Parent shall cause the Paying Agent to mail to each
holder of record of a Share as of immediately prior to the Effective Time (A) a
letter of transmittal in customary form, specifying that delivery shall be
effected, and risk of loss and title to such holder's Shares shall pass, only
upon proper delivery of the Certificates representing such Shares to the Paying
Agent and (B) instructions for surrendering such Certificates.
(ii) Surrender of Certificates. Upon surrender of a
Certificate for cancellation to the Paying Agent, together with a duly executed
letter of transmittal and any other documents reasonably required by the Paying
Agent, the holder of that Certificate shall be entitled to receive, and the
Paying Agent shall pay in exchange therefor, the Merger Consideration payable in
respect of the number of Shares evidenced by that Certificate. Any Certificates
so surrendered shall be cancelled immediately. No interest shall accrue or be
paid on any amount payable upon surrender of Certificates.
(iii) Unregistered Transferees. If any Merger
Consideration is to be paid to a Person other than the Person in whose name the
surrendered Certificate is registered, then the Merger Consideration may be paid
to such a transferee so long as (A) the surrendered Certificate is accompanied
by all documents required to evidence and effect that transfer and (B) the
Paying Agent shall be entitled to deduct any applicable transfer Taxes from the
Merger Consideration in accordance with the provisions of Section 2.02(e),
unless the Person requesting such payment establishes to the satisfaction of the
Paying Agent that any such Taxes have already been paid or are not applicable.
(iv) No Other Rights. Until surrendered in accordance
with this Section 2.02(c), each Certificate shall be deemed, from and after the
Effective Time, to represent only the right to receive the applicable Merger
Consideration. Any Merger Consideration paid upon the surrender of any
Certificate shall be deemed to have been paid in full satisfaction of all rights
pertaining to that Certificate and the shares of Company Common Stock formerly
represented by it.
(d) No Further Transfers. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of
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transfers of the shares of Company Common Stock that were outstanding
immediately prior to the Effective Time.
(e) Withholding Rights. Each of the Paying Agent, the
Surviving Corporation, the Company, Parent and Merger Sub shall be entitled to
deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any holder of Shares or Company Stock Options such amounts for
Taxes as it is required to deduct and withhold with respect to such payment
under all applicable Tax Laws and pay such withholding amount over to the
appropriate Governmental Authority. To the extent that amounts are so withheld
by the Paying Agent, the Surviving Corporation, the Company, Parent or Merger
Sub, as the case may be, such withheld amounts shall be treated for all purposes
of this Agreement as having been paid to the holder of the Shares or Company
Stock Options, as the case may be, in respect of which such deduction and
withholding was made by the Paying Agent, the Surviving Corporation, the
Company, Parent or Merger Sub, as the case may be.
(f) No Liability. None of Parent, the Surviving Corporation or
the Paying Agent shall be liable to any holder of Certificates for any amount
properly paid to a public official under any applicable abandoned property,
escheat or similar Laws.
(g) Investment of Exchange Fund. As directed by Parent, the
Exchange Fund shall be invested by the Paying Agent in (i) direct obligations of
the United States of America or (ii) obligations for which the full faith and
credit of the United States of America is pledged to provide for payment of all
principal and interest. Any interest and other income resulting from such
investment shall become a part of the Exchange Fund and shall inure to Parent
for Tax purposes, and any amounts in excess of the amounts payable under Section
2.01(a) shall be paid to Parent upon termination of the Exchange Fund pursuant
to Section 2.02(h); provided, however, that (i) no such investment or losses
thereon shall affect the Merger Consideration payable to the holders of Shares
and (ii) promptly following any losses which cause the Exchange Fund to then
hold less than the aggregate Merger Consideration payable in respect of Shares
for which payment shall not theretofore have been made, Parent shall promptly
provide additional funds to the Paying Agent for the benefit of the stockholders
of the Company to the extent that such losses have so caused the Exchange Fund
to hold less than the aggregate Merger Consideration payable in respect of such
Shares for which payment has not theretofore been made. The Exchange Fund shall
not be used for any purpose other than to fund payments due pursuant to Section
2.01.
(h) Termination of Exchange Fund. Without limiting Parent's
right to receive interest and other income in respect of the Exchange Fund as
described in Section 2.02(g), any portion of the Exchange Fund that remains
unclaimed by the holders of Certificates twelve months after the Effective Time
shall be delivered by the Paying Agent to Parent upon demand. Thereafter, any
holder of Certificates who has not complied with this ARTICLE II shall look only
to Parent for payment of the applicable Merger Consideration.
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(i) Lost, Stolen or Destroyed Certificates. If any Certificate
is lost, stolen or destroyed, upon the making of an affidavit of that fact by
the Person claiming such Certificate to be lost, stolen or destroyed and the
posting by such Person of a bond in the form and amount reasonably required by
Parent as indemnity against any claim that may be made against Parent on account
of the alleged loss, theft or destruction of such Certificate, the holder
thereof shall be entitled to receive, and the Paying Agent shall pay in exchange
therefor, the applicable Merger Consideration to such Person in exchange for
such lost, stolen or destroyed Certificate.
Section 2.03 Options.
(a) Except as otherwise agreed prior to the Effective Time by
Parent and the Company, immediately prior to the Effective Time, all options to
purchase shares of Company Common Stock (the "Company Stock Options") granted
under any plan, arrangement or agreement (the "Company Stock Option Plans")
shall be cancelled by the Company and shall no longer be outstanding thereafter.
In consideration for such cancellation (whether or not the Company Stock Option
was then vested and exercisable), the holder thereof shall thereupon be entitled
to receive, within five (5) days after the Effective Time, a cash payment
without interest from the Surviving Corporation in respect of such cancellation
in an amount (if any) equal to the product of (x) the number of shares of
Company Common Stock subject to such Company Stock Option, whether or not then
vested and exercisable, and (y) the excess, if any, of the Merger Consideration
over the exercise price per share of Company Common Stock subject to such
Company Stock Option (the "Option Consideration"), reduced by any Tax required
to be withheld with respect to such payment in accordance with the provisions of
Section 2.02(e).
(b) At or prior to the Effective Time, the Company, the
Company Board or the compensation committee of such Company Board, as
applicable, shall take all actions reasonably requested by Parent and shall use
reasonable best efforts, subject to Parent's approval (not to be unreasonably
withheld) to effectuate the provisions of this Section 2.03 (including using
reasonable best efforts to obtain any required or desirable employee consents) ,
and to provide that, from and after the Effective Time, none of Parent, Merger
Sub, or the Surviving Corporation will be required to deliver shares of common
stock or shares of capital stock of Parent or the Surviving Corporation or any
of their Affiliates to any Person pursuant to or in settlement of Company Stock
Options at or after the Effective Time.
Section 2.04 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of Company Common Stock outstanding immediately prior to
the Effective Time for which the holder thereof (i) has not voted in favor of
the Merger or consented to it in writing and (ii) has demanded the appraisal of
such shares in accordance with, and has complied in all respects with, Section
262 of the DGCL (collectively, the "Dissenting Shares") shall not be converted
into the right to receive the Merger Consideration in accordance with Section
2.01(a). At the Effective Time, (x) all
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Dissenting Shares shall be cancelled and cease to exist and (y) the holder or
holders of Dissenting Shares shall be entitled only to such rights as may be
granted to them under Section 262 of the DGCL ("Section 262").
(b) Notwithstanding the provisions of Section 2.04, if any
holder of Dissenting Shares effectively withdraws or loses such appraisal rights
(through failure to perfect such appraisal rights or otherwise), then that
holder's shares (i) shall no longer be deemed to be Dissenting Shares and (ii)
shall be treated as if they had been converted automatically at the Effective
Time into the right to receive the Merger Consideration, without interest
thereon, upon surrender of the Certificate formerly representing such shares in
accordance with Section 2.02. In such event, if the Exchange Fund shall then
remain in place, Parent shall promptly deposit or cause the Surviving
Corporation to deposit in the Exchange Fund the aggregate amount of Merger
Consideration in respect of such Dissenting Shares.
(c) The Company shall give Parent (i) prompt notice of any
demands for appraisal of any shares of Company Common Stock, the withdrawals of
such demands, and any other instrument served on the Company under the
provisions of Section 262 and (ii) the right to participate in all negotiations
and proceedings with respect to demands for appraisal under the DGCL. The
Company shall not offer or agree to make or make any payment with respect to any
demands for appraisal or offer to settle or settle any such demands without the
prior written consent of Parent.
Section 2.05 Timing of Equity Rollover. For the avoidance of doubt, the
parties acknowledge and agree that the contribution of shares of Company Common
Stock to Parent pursuant to any Rollover Commitments shall be deemed to occur
immediately prior to the Effective Time and prior to any other above-described
event.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
Concurrently with the execution and delivery of this Agreement, the
Company has delivered to Parent and Merger Sub a letter (the "Company Disclosure
Letter") setting forth, among other things, items the disclosure of which is
necessary either in response to an express disclosure requirement contained in a
provision hereof or as an exception to one or more of the Company's
representations or warranties contained in this ARTICLE III, or to one or more
of the Company's covenants contained in Section 5.01; provided, however, that,
notwithstanding anything in this Agreement to the contrary, the mere inclusion
of an item in the Company Disclosure Letter as an exception to a representation
or warranty or covenant shall not be deemed an admission by the Company that
such item represents a material exception or material fact, event or
circumstance or that such item would or would reasonably be expected to,
individually or in the aggregate, have a Company Material Adverse Effect. Each
disclosure set forth in the Company Disclosure Letter is identified by reference
to, or has been grouped under a heading referring to, a specific individual
section of this Agreement and shall only be
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deemed a qualification or exception to such section and to any other sections to
which it is reasonably apparent that such disclosure relates.
Except as set forth in the Company Disclosure Letter and except as
disclosed in the Annual Report on Form 10-K of the Company and the amended Form
10-K of the Company for the fiscal period ended June 30, 2006 (the "Form
10-K/A"), the Quarterly Reports on Form 10-Q and the Current Reports on Form 8-K
filed from the date of the filing of the Form 10-K/A and any amendments to any
such reports, in the case of all such reports and amendments through at least
two (2) business days prior to the date of this Agreement (excluding any
disclosures set forth in any risk factor section thereof, in any section
relating to forward looking statements and any other disclosures included
therein to the extent that they are cautionary, predictive or forward-looking in
nature), the Company represents and warrants to Parent and Merger Sub as set
forth in Section 3.01 through Section 3.25 that:
Section 3.01 Organization and Qualification. Each of the Company and
each Active Subsidiary is a corporation, limited company, limited partnership,
limited liability company or other entity duly organized, validly existing and
in good standing (in each instance where such concepts are legally applicable)
under the Laws of the jurisdiction of its organization and has the requisite
corporate, limited company, partnership, limited liability company or other
entity (as the case may be) power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted, except,
with respect to any Company Subsidiary, where the failure to be in good standing
would not, or would not reasonably be expected to, individually or in the
aggregate, have a Company Material Adverse Effect. The Company and each of the
Company Subsidiaries is duly qualified or licensed as a foreign corporation to
do business and is in good standing (in each instance where such concepts are
legally applicable) in each jurisdiction where the character of the properties
owned, leased or operated by it or the nature of its business makes such
qualification or licensing necessary, except where the failure to be so
qualified or licensed and in good standing would not, or would not reasonably be
expected to, individually or in the aggregate, have a Company Material Adverse
Effect. A true and complete list of all the Inactive Subsidiaries, together with
the jurisdiction of incorporation of each Inactive Subsidiary, is set forth in
Section 3.03(c) of the Company Disclosure Letter. The Company represents that no
Inactive Subsidiary is engaged in any business activity, conducts any
operations, nor has or incurs any liabilities, debts or other obligations of any
nature (whether known or unknown, absolute, accrued, contingent or otherwise).
Section 3.02 Certificate of Incorporation and Bylaws. The Company has
made available to Parent a complete and correct copy of the certificate of
incorporation and the bylaws (or similar organizational documents), as in effect
as of the date of this Agreement, of the Company and each Active Subsidiary.
Such certificates of incorporation and bylaws (or similar organizational
documents) are in full force and effect.
- 8 -
Section 3.03 Capitalization.
(a) The authorized capital stock of the Company consists of
(i) 110,000,000 shares of Company Common Stock and (ii) 1,000,000 shares of
preferred stock, par value $0.10 per share ("Company Preferred Stock"), 110,000
shares of which have been designated Series A Junior Participating Preferred
Stock (the "Series A Preferred Stock"), par value $0.10 per share. As of May 18,
2007 (the "Capitalization Date"), (A) 74,787,900 shares of Company Common Stock
were issued and outstanding, all of which are duly authorized, validly issued,
fully paid and nonassessable and were issued free of preemptive (or similar)
rights, (B) no shares of Company Common Stock were held by the Company as
treasury stock, (C) no shares of Company Common Stock were held by the Company
Subsidiaries, (D) no shares of Series A Preferred Stock or other shares of
preferred stock were issued and outstanding, and (E) 16,380,348 shares of
Company Common Stock were reserved for future issuance in connection with the
Company Stock Option Plans (including shares reserved pursuant to outstanding
Company Stock Options). Since the Capitalization Date through the date of this
Agreement, other than in connection with the issuance of Shares pursuant to the
exercise of Company Stock Options outstanding as of the Capitalization Date and
set forth in Section 3.03(a)(i) of the Company Disclosure Letter, there has been
no change in the number of shares of outstanding or reserved capital stock of
the Company or the number of outstanding Company Stock Options. Section
3.03(a)(i) of the Company Disclosure Letter sets forth, as of the Capitalization
Date, a summary of Company Stock Options and other rights to purchase or receive
shares of capital stock of the Company under the Company Stock Plans, the
expiration date and the exercise price of each such Company Stock Option or
right and the number of shares issuable under each Company Stock Option or
right. The Company represents that the exercise price of each Company Stock
Option is not less than the fair market value (as determined by the compensation
committee of the Company Board) of the underlying shares on the date the grant
of such Company Stock Option was approved by the Company Board and the
compensation committee of such board.
(b) A true and complete schedule of each Company Stock Option
Plan pursuant to which any Company Stock Options were issued, which schedule
sets forth under each Company Stock Option Plan each issued and outstanding
Company Stock Option issued thereunder, is set forth in Section 3.03(b) of the
Company Disclosure Letter. The Company has made available to Parent a true and
complete copy of each Company Stock Option Plan. There are no (i) subscriptions,
calls, contracts, options, warrants or other rights, agreements, arrangements,
understandings, restrictions or commitments of any character to which the
Company or any Company Subsidiary is a party or by which the Company or any
Company Subsidiary is bound relating to the issued or unissued capital stock or
equity interests of the Company or any Company Subsidiary or obligating the
Company or any Company Subsidiary to issue or sell any shares of capital stock
of, other equity interests in or debt securities of, the Company or any Company
Subsidiary, (ii) securities of the Company or securities convertible,
exchangeable or exercisable for shares of capital stock or equity interests of
the Company or any Company Subsidiary, or (iii) equity equivalents, stock
appreciation rights or phantom stock, ownership interests in the Company or any
Company Subsidiary or
- 9 -
similar rights. All shares of Company Common Stock subject to issuance as set
forth in Section 3.03(a) are duly authorized and, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
will be validly issued, fully paid and nonassessable and free of preemptive (or
similar) rights. There are no outstanding contractual obligations or rights of
the Company or any Company Subsidiary to repurchase, redeem or otherwise acquire
any securities or equity interests of the Company or any Company Subsidiary or
to vote or to dispose of any shares of capital stock or equity interests of the
Company or any Company Subsidiary. None of the Company or any Company Subsidiary
is a party to any stockholders' agreement, voting trust agreement or
registration rights agreement relating to any equity securities or equity
interests of the Company or any Company Subsidiary or any other Contract
relating to disposition, voting or dividends with respect to any equity
securities or equity interests of the Company or of any Company Subsidiary. No
dividends on the Company Common Stock have been declared or paid from July 1,
2006 through the date of this Agreement. There are no outstanding bonds,
debentures, notes or other indebtedness of the Company or any of the Company
Subsidiaries having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matter for which the Company's
stockholders may vote.
(c) Each outstanding share of capital stock (or other unit of
equity interest) of each Company Subsidiary is duly authorized, validly issued,
fully paid and nonassessable (where such concepts are legally applicable) and
was issued free of preemptive (or similar) rights, and each such share, unit or
other equity interest is owned by the Company and/or by one (1) or more
wholly-owned Company Subsidiaries, free and clear of all options, rights of
first refusal, agreements, limitations on the Company's or any Company
Subsidiary's voting, dividend or transfer rights, charges and other encumbrances
or Liens of any nature whatsoever. A true and complete list of all the Company
Subsidiaries, together with the jurisdiction of incorporation of each Company
Subsidiary, is set forth in Section 3.03(c) of the Company Disclosure Letter.
Section 3.03(c) of the Company Disclosure Letter lists any and all Persons who
are not Company Subsidiaries but of which the Company directly or indirectly
owns an equity or similar interest, or an interest convertible into or
exchangeable or exercisable for an equity or similar interest (collectively, the
"Investments"). The Company or a Company Subsidiary, as the case may be, owns
all capital stock in the Company Subsidiaries and all Investments free and clear
of all Liens, and there are no outstanding contractual obligations of the
Company or any Company Subsidiary permitting the repurchase, redemption or other
acquisition of any of the capital stock of any Company Subsidiary or any
Investments or requiring under any circumstances the Company or any Company
Subsidiary to repurchase, redeem or otherwise acquire the capital stock of any
other Person in such Investments, or provide funds to, make any investment (in
the form of a loan, capital contribution or otherwise) in, provide any guarantee
with respect to, or assume, endorse or otherwise become responsible for the
obligations of, any Investment.
(d) As of the date of this Agreement, the only outstanding
Indebtedness of the Company and the Company Subsidiaries or Liens (other than
Permitted Liens) on any of their respective assets is set forth in Section
3.03(d) of the
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Company Disclosure Letter, other than Indebtedness of not more than $50,000
individually or $100,000 in the aggregate.
Section 3.04 Authority Relative to This Agreement. The Company has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the Merger and the other
transactions contemplated by this Agreement to be consummated by the Company
(the "Other Transactions"). The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the Merger and
the Other Transactions have been duly and validly authorized by all necessary
corporate action, and no other corporate actions on the part of the Company are
necessary to authorize this Agreement or to consummate the Merger or the Other
Transactions (other than the adoption of this Agreement by the affirmative vote
of the holders of a majority of the then outstanding shares of Company Common
Stock entitled to vote thereon and the filing of the Certificate of Merger).
This Agreement has been duly and validly executed and delivered by the Company
and, assuming the due authorization, execution and delivery by Parent and Merger
Sub, constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to the
effect of any general principles of equity, whether applied in a court of law or
a court of equity, and by bankruptcy, insolvency and similar Laws affecting
creditors' rights and remedies generally, including all Laws relating to
fraudulent transfers.
Section 3.05 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by the
Company do not, and the performance of this Agreement by the Company and the
consummation by the Company of the Merger and the Other Transactions will not
(i) contravene, conflict with, violate or result in a breach of (A) the
certificate of incorporation or bylaws of the Company or (B) similar
organizational documents of any Company Subsidiary, (ii) assuming that all
consents, approvals and other authorizations described in Section 3.05(b) have
been obtained and that all filings and other actions described in Section
3.05(b) have been made or taken, contravene, conflict with or violate any U.S.
federal, state or local or foreign statute, law, ordinance, regulation, rule,
code, executive order, judgment, decree or other order ("Law") applicable to the
Company or any Company Subsidiary, or (iii) result in any material breach or
violation of or constitute a default under (with or without notice or lapse of
time or both), require consent or result in a loss of a material benefit under,
give rise to a material obligation under, give to others any right of
termination, amendment, acceleration or cancellation of, or result in the
creation of a Lien (other than any Liens resulting from the Financing) on any
property or asset of the Company or any Company Subsidiary pursuant to any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other binding commitment, instrument or obligation (each, a
"Contract") or under any Law or Permit, in each case, to which the Company or
any Company Subsidiary is a party or by which the Company or a Company
Subsidiary is bound or affected, except, with respect to clauses (i)(B) and
(ii), for any such conflicts, violations, breaches, defaults or other
occurrences which would not, or would not reasonably be expected to,
individually or in the aggregate, have a Company Material Adverse Effect.
- 11 -
(b) The execution and delivery of this Agreement by the
Company do not, and the performance of this Agreement by the Company and the
consummation by the Company of the Merger and the Other Transactions do not and
will not, require any consent, approval, authorization or permit of, or filing
with or notification to, any supranational, national, provincial, federal, state
or local government, regulatory or administrative authority, or any court,
agency, commission, tribunal, or judicial or arbitral body or self-regulated
entity, whether domestic or foreign, (a "Governmental Authority"), except for
(i) applicable disclosure requirements of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), (ii) the pre-merger notification requirements
of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), and the competition or merger control Laws of any other applicable
jurisdiction, (iii) the filing with, and clearance by, the Securities and
Exchange Commission (the "SEC") of a proxy statement relating to the adoption of
this Agreement by the Company's stockholders (as amended or supplemented from
time to time, the "Proxy Statement"), (iv) any filings required by, any
approvals required under and any other applicable requirements of, the rules and
regulations of the NASDAQ National Market, (v) the filing and recordation of
appropriate merger documents as required by the DGCL and appropriate documents
with the relevant authorities of other states in which the Company is qualified
to do business, and (vi) such consents, approvals, authorizations, permits,
actions, notifications or filings, the failure of which to be made or obtained
would not, or would not reasonably be expected to, individually or in the
aggregate, have a Company Material Adverse Effect.
Section 3.06 Permits; Compliance with Laws.
(a) Except as would not, or would not reasonably be expected
to, individually or in the aggregate, have a Company Material Adverse Effect,
(i) each of the Company and each Company Subsidiary is in possession of all
franchises, grants, authorizations, licenses, permits, easements, variances,
exceptions, consents, certificates, approvals and orders of any Governmental
Authority necessary for each such entity to own, lease and operate its
properties or to carry on its business as it is now being conducted (the
"Company Permits"), (ii) all such Company Permits are in full force and effect,
(iii) no default or violation has occurred under any such Company Permit and no
notice of a default or violation has been received from any Governmental
Authority and (iv) neither the Company nor any Company Subsidiary has received
any written, or to the knowledge of the Company, other notification from any
Governmental Authority threatening to revoke, suspend or cancel any such Company
Permit.
(b) Each of the Company and each Company Subsidiary is, and at
all times since July 1, 2004, has been, in compliance with all Company Permits
and all Laws applicable to such entity or by which any property or asset of such
entity is bound or affected, and has not received any written, or to the
knowledge of the Company, other notice of any violation of any such Law, except
as would not, or would not reasonably be expected to, individually or in the
aggregate, have a Company Material Adverse Effect.
(c) The Company and the Company Subsidiaries are in compliance
with all statutory and regulatory requirements under the Arms Export Control
- 12 -
Act (22 U.S.C. 2778), the International Traffic in Arms Regulations (22 C.F.R.
ss. 120 et seq.), the Export Administration Regulations (15 C.F.R. ss. 730 et
seq.) and associated executive orders, and the Laws implemented by the Office of
Foreign Assets Controls, United States Department of the Treasury (collectively,
the "Export Control Laws"), except for any failure to be in compliance that
would not, or would not reasonably be expected to, individually or in the
aggregate, have a Company Material Adverse Effect. Neither the Company nor any
of the Company Subsidiaries has received any written or, to the knowledge of the
Company, other communication since July 1, 2002 that alleges that the Company or
a Company Subsidiary is not, or may not be, in compliance with, or has, or may
have, any Liability under, the Export Control Laws, except for any actual or
possible failure to be in compliance or Liability that would not, or would not
reasonably be expected to, individually or in the aggregate, have a Company
Material Adverse Effect.
(d) Neither the Company, nor any Company Subsidiaries, nor any
of their Affiliates or any other Persons acting on their behalf has, in
connection with the operation of their respective businesses, (i) used any
corporate or other funds for unlawful contributions, payments, gifts or
entertainment, or made any unlawful expenditures relating to political activity
to government officials, candidates or members of political parties or
organizations, or established or maintained any unlawful or unrecorded funds in
violation of Section 104 of the Foreign Corrupt Practices Act of 1977, as
amended, or any other similar applicable foreign, Federal or state law, (ii)
paid, accepted or received any unlawful contributions, payments, expenditures or
gifts, or (iii) violated or operated in noncompliance with any export
restrictions, anti-boycott regulations, embargo regulations or other applicable
domestic or foreign laws and regulations, except in the case of clauses (i),
(ii) or (iii) above, would not, or would not reasonably be expected to,
individually or in the aggregate have a Company Material Adverse Effect.
(e) The Company has made all certifications and statements
required by the Sarbanes-Oxley Act of 2002 and the related rules and regulations
promulgated thereunder (the "Sarbanes-Oxley Act") with respect to the Company's
filings pursuant to the Exchange Act. The Company has established and maintains
disclosure controls and procedures (as defined in Rule 13a-15 under the Exchange
Act) as required by Rule 13a-15 of the Exchange Act.
(f) The Company has designed a system of internal accounting
control sufficient to comply, in all material respects, with all legal and
accounting requirements applicable to the Company. The Company and the Company
Subsidiaries have disclosed, based on their most recent evaluation of internal
controls, to the Company's and Company Subsidiaries' outside auditors and the
audit committee of the board of directors of the Company and Company
Subsidiaries (A) all significant deficiencies and material weaknesses in the
design or operation of its internal controls over financial reporting (as
defined in Rule 13a-15(f) of the Exchange Act) which are reasonably likely to
adversely affect in any material respect the Company's and Company Subsidiaries'
ability to record, process, summarize and report financial information and (B)
any fraud, whether or not material, that involves management or other employees
- 13 -
who have a significant role in the Company's or the Company Subsidiaries'
internal controls over financial reporting. Since July 1, 2004, the Company has
not received written or, to the knowledge of the Company, other complaints,
allegations, assertions or claims regarding the accounting practices,
procedures, methodologies or methods of the Company or its internal accounting
controls, including any such complaints, allegations, assertions or claims that
the Company has engaged in questionable accounting or auditing practices.
Section 3.07 SEC Filings; Financial Statements; Undisclosed
Liabilities.
(a) The Company has timely filed with the SEC all forms,
reports, statements, schedules, certifications and other documents (including
exhibits) required to be filed by it with the SEC since July 1, 2004 (the "SEC
Reports"). The SEC Reports (including any documents or information incorporated
by reference therein and including any financial statements or schedules
included therein) (i) at the time they were filed, complied in all material
respects with, and were prepared in accordance with, all applicable requirements
of the Securities Act of 1933, as amended (the "Securities Act"), the Exchange
Act, the Sarbanes-Oxley Act and, in each case, the rules and regulations of the
SEC promulgated thereunder, and (ii) did not, at the time they were filed, or if
amended, as of the date of such amendment, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. No Company Subsidiary
is subject to the periodic reporting requirements of the Exchange Act or is or
has been since July 1, 2004 otherwise required to file any form, report,
statement, schedule, certification or other document with the SEC, any foreign
Governmental Authority that performs a similar function to that of the SEC or
any securities exchange or quotation system. The Company has made available to
Parent copies of all material correspondence between the SEC, on the one hand,
and the Company and any of the Company Subsidiaries, on the other hand, since
July 1, 2004 through the date of this Agreement.
(b) Each of the consolidated financial statements (including,
in each case, any notes and schedules thereto) included or incorporated by
reference in the SEC Reports complied in all material respects with the
applicable accounting requirements and rules and regulations of the SEC, and
each fairly presents, in all material respects, the consolidated financial
position, results of operations and cash flows of the Company and the Company
Subsidiaries as at the respective dates thereof and for the respective periods
indicated therein in conformity with United States generally accepted accounting
principles ("GAAP") consistently applied (except as described therein and
subject, in the case of unaudited statements, to normal and recurring year-end
adjustments). All of the Company Subsidiaries are consolidated for accounting
purposes. Except as reflected in the financial statements included in the SEC
Reports as of June 30, 2006 or otherwise disclosed in an SEC Report filed at
least two (2) business days prior to the date of this Agreement, neither the
Company nor any of the Company Subsidiaries is a party to any material
off-balance sheet arrangements (as defined in Item 303 of Regulation S-K
promulgated under the Exchange Act).
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(c) Except as and to the extent set forth on the consolidated
balance sheet (including notes thereof) of the Company and the Company
Subsidiaries as at June 30, 2006 included in the Form 10-K/A (the "Balance
Sheet") neither the Company nor any Company Subsidiary has any liability or
obligation of any nature (whether accrued, absolute, contingent or otherwise)
(collectively, "Liabilities"), except for Liabilities (i) incurred in the
ordinary course of business and in a manner consistent with past practice since
June 30, 2006, (ii) set forth in Section 3.07(b) of the Company Disclosure
Letter, (iii) arising under this Agreement, or (iv) that would not, or would not
reasonably be expected to, individually or in the aggregate, have a Company
Material Adverse Effect.
Section 3.08 Affiliate Transactions. Except as set forth in the SEC
Reports filed at least two (2) days prior to the date of this Agreement, there
are no material transactions, agreements, arrangements or understandings between
(i) the Company or any of the Company Subsidiaries, on the one hand, and (ii)
any Affiliate of the Company (other than any of the Company Subsidiaries), on
the other hand, of the type that would be required to be disclosed under Item
404 of Regulation S-K under the Securities Act. Except as set forth in the SEC
Reports filed at least two (2) days prior to the date of this Agreement, Section
3.08 of the Company Disclosure Letter sets forth a true, complete and correct
description of (A) all material transactions, contracts, agreements or
understandings entered into or in effect since July 1, 2004 between the Company
or any of the Company Subsidiaries, on the one hand, and any stockholder,
officer, director or Affiliate (other than the Company or any Company
Subsidiary) of the Company (or any Person in which such Person holds, directly
or indirectly, an equity voting interest of five percent (5%) or greater) or any
family member of any of the foregoing, on the other hand, and (B) any revenues
associated with such related party transactions, contracts, agreements or
understandings.
Section 3.09 Absence of Certain Changes or Events. From June 30, 2006
through the date of this Agreement, there has not occurred any Company Material
Adverse Effect. From June 30, 2006 through the date of this Agreement, (i) the
Company and the Company Subsidiaries have conducted their businesses in all
material respects in the ordinary course of business and in a manner consistent
with past practice and (ii) except for actions taken in the ordinary course of
business and in a manner consistent with past practice, neither the Company nor
any Company Subsidiary has taken any action or agreed to take any action that
would have been prohibited by Section 5.01 had this Agreement been in effect for
such period.
Section 3.10 Absence of Litigation. There is no litigation, suit,
claim, action, proceeding, hearing, petition, grievance, complaint or
investigation (an "Action") pending or, to the knowledge of the Company,
threatened, against, or affecting, the Company or any Company Subsidiary, by or
before any Governmental Authority or arbitrator which, if adversely determined,
would or would reasonably be expected to, individually or in the aggregate, have
a Company Material Adverse Effect. Neither the Company nor any Company
Subsidiary is subject to any order, writ, judgment, injunction, decree,
determination or award of, or, to the knowledge of the Company, any continuing
investigation by, any Governmental Authority, except as would not, or would
- 15 -
not reasonably be expected to, individually or in the aggregate, have a Company
Material Adverse Effect.
Section 3.11 Employee Benefit Plans.
(a) Section 3.11(a) of the Company Disclosure Letter sets
forth a true and complete list of (i) all material employee benefit plans (as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) and all material bonus, stock option, stock purchase,
restricted stock, incentive, deferred compensation, retiree medical or life
insurance, supplemental retirement, severance or other benefit plans, programs
or arrangements; and (ii) all material employment, termination, severance or
other contracts, agreements or commitments to which the Company or any Company
Subsidiary is a party, with respect to which the Company or any Company
Subsidiary has or may reasonably be expected to have any obligation or which are
maintained, contributed to or sponsored by the Company or any Company Subsidiary
for the benefit of any current or former employee, consultant, officer or
director of the Company or any Company Subsidiary (collectively, the "Plans").
The Company has made available to Parent a true and complete copy (where
applicable) of (A) each Plan (or, where a Plan has not been reduced to writing,
a summary of all material Plan terms of such Plan), (B) each trust or funding
arrangement prepared in connection with each such Plan, (C) the most recently
filed annual report on Internal Revenue Service ("IRS") Form 5500 or any other
annual report required by applicable Law, (D) the most recently received IRS
determination letter, if any, for each such Plan, (E) the most recently prepared
actuarial report and financial statement in connection with each such Plan, and
(F) the most recent summary plan description, any summaries of material
modification, any employee handbooks, and any material written communications by
the Company or the Company Subsidiaries to any current or former employees,
consultants, or directors of the Company or any Company Subsidiary concerning
the extent of the benefits provided under a Plan. Except as set forth on Section
3.11(a) of the Company Disclosure Letter, neither the Company nor any Company
Subsidiary has any plan or commitment to establish any new material Plan or to
materially modify any Plan.
(b) None of the Company or any Company Subsidiary or any other
Person or entity that, together with the Company or any Company Subsidiary, is
or was treated as a single employer under Section 414(b), (c), (m) or (o) of the
Code (each, together with the Company and any Company Subsidiary, an "ERISA
Affiliate"), has now or at any time within the past six years (and in the case
of any such other Person or entity, only during the period within the past six
years that such other Person or entity was an ERISA Affiliate) contributed to,
sponsored, or maintained (i) a pension plan (within the meaning of Section 3(2)
of ERISA) subject to Section 412 of the Code or Title IV of ERISA; (ii) a
multiemployer plan (within the meaning of Section 3(37) or 4001(a)(3) of ERISA
or the comparable provisions of any other applicable Law) (a "Multiemployer
Plan"); or (iii) a single employer pension plan (within the meaning of Section
4001(a)(15) of ERISA) for which an ERISA Affiliate would reasonably be expected
to incur Liability under Section 4063 or 4064 of ERISA (a "Multiple Employer
Plan").
- 16 -
(c) No Plan exists that would reasonably be expected to result
in the payment to any present or former employee, director or consultant of the
Company or any Company Subsidiary of any money or other property or accelerate
or provide any other rights or benefits to any current or former employee,
director or consultant of the Company or any Company Subsidiary as a result of
the consummation of the Merger or the Other Transactions (whether alone or in
connection with any other event). Neither the execution and delivery of this
Agreement nor the consummation of the Merger or the Other Transactions will
(either alone or in combination with another event) result in any payment or
other benefit that has been or may be made to any current or former employee or
independent contractor of the Company or any Company Subsidiary under any
employment, severance or termination agreement, other compensation arrangement
or employee benefit plan or arrangement with the Company or any Company
Subsidiary to be characterized as an "excess parachute payment," as such term is
defined in Section 280G of the United States Internal Revenue Code of 1986, as
amended (the "Code"). None of the Company or any Company Subsidiary is a party
to any material agreement, contract, arrangement or plan pursuant to which it is
bound to compensate any Person for any excise or other additional Taxes paid
pursuant to Section 409A or 4999 of the Code or any similar provision of state,
local or foreign Law.
(d) Each Plan that is intended to be qualified under Section
401(a) of the Code is so qualified, and each trust established in connection
with any Plan which is intended to be exempt from federal income taxation under
Section 501(a) of the Code has received a determination letter from the IRS that
it is so exempt, and, to the knowledge of the Company, no fact or circumstance
exists that would reasonably be expected to result in the revocation of such
letter.
(e) (i) Each Plan has been established and administered in
accordance with its terms, and in compliance with the applicable provisions of
ERISA, the Code and other applicable Laws, except to the extent such
noncompliance would not, or would not reasonably be expected to, individually or
in the aggregate, have a Company Material Adverse Effect, and (ii) no Plan
provides post-termination benefits, and neither the Company nor any Company
Subsidiary has any obligation to provide any post-termination benefits other
than for health care continuation as required by Section 4980B of the Code or
any similar statute.
(f) With respect to any Plan, (i) no Actions (other than
routine claims for benefits in the ordinary course) are pending or, to the
knowledge of the Company, threatened, except for those that would not, or would
not reasonably be expected to, individually or in the aggregate, have a Company
Material Adverse Effect, (ii) to the knowledge of the Company, no facts or
circumstances exist that would reasonably be expected to give rise to any
Actions that would or would reasonably be expected to, individually or in the
aggregate, have a Company Material Adverse Effect, and (iii) to the knowledge of
the Company, no administrative investigation, audit or other administrative
proceeding by the Department of Labor, the IRS or other Governmental Authority
is pending, in progress or threatened, except for those that would not, or would
not reasonably be expected to, individually or in the aggregate, have a Company
Material Adverse Effect.
- 17 -
(g) No Plan is a defined benefit pension plan governed by laws
outside of the United States. The Company represents that any debts due by the
Company or a Company Subsidiary to the PA Pension Scheme under section 75, as
amended, of the Pensions Act 1995, have been paid in full and neither the
Company nor any Company Subsidiary has any undischarged obligations or
liabilities (whether current or contingent, including for this purpose any
contingent liability arising from a possible financial support direction,
restoration order or contribution notice under the Pensions Act 2004) in
relation to the PA Pension Scheme.
(h) Neither the Company nor any Company Subsidiary nor, to the
knowledge of the Company, any other "party in interest" or "disqualified person"
with respect to any Plan, since June 30, 2001, has engaged in a non-exempt
"prohibited transaction" within the meaning of Section 406 of ERISA or Section
4975 of the Code involving such Plan, other than as would not, or would not
reasonably be expected to, individually or in the aggregate, have a Company
Material Adverse Effect. To the knowledge of the Company, no fiduciary has any
Liability for breach of fiduciary duty or any other failure to act or comply
with the requirements of ERISA, the Code or any other applicable Laws in
connection with the administration or investment of the assets of any Plan.
(i) All contributions (including all employer contributions
and employee salary reduction contributions) or premium payments required to
have been made under the terms of any Plan, or in accordance with applicable
Law, as of the date hereof have been made or reflected on the Company's
financial statements in accordance with GAAP. No "accumulated funding
deficiency" as defined in Section 302 of ERISA or Section 412 of the Code,
whether or not waived, exists with respect to any Plan subject to Section 302 of
ERISA or Section 412 of the Code and the Company is not, and does not expect to
be, subject to (i) any requirement to post security pursuant to Section 412(f)
of the Code or (ii) any lien pursuant to Section 412(n) of the Code.
(j) Since July 1, 1996, the date of grant of each Company
Stock Option reflected on the books and records of the Company and used in
determining the accounting charge, if any, in respect of such Company Stock
Option is the actual date on which such Company Stock Option was granted. There
is no internal or, to the knowledge of the Company, external investigation or
inquiry, whether ongoing or completed, the subject of which was wholly or
partially the determination of the proper grant date of Company Stock Options.
For purposes of this Section 3.11(i), the term "Company Stock Option" includes
each stock option which would be a Company Stock Option but for the fact that it
was exercised prior to the date of this Agreement.
Section 3.12 Labor and Employment Matters.
(a) Neither the Company nor any Company Subsidiary is or has
been within the last six years a party to any collective bargaining agreement or
other agreements or arrangements with any labor union or works council
applicable to Persons employed by the Company or any Company Subsidiary, nor is
any such agreement or arrangement being negotiated, nor, to the knowledge of the
Company, are there any such
- 18 -
employees represented by a works council or a labor organization or activities
or proceedings of any labor union to organize any such employees. Except as
would not, or would not reasonably be expected to, individually or in the
aggregate, have a Company Material Adverse Effect, no work stoppage, slowdown or
labor strike against the Company or any Company Subsidiary is pending or, to the
knowledge of the Company, threatened. Except as would not, or would not
reasonably be expected to, individually or in the aggregate, have a Company
Material Adverse Effect, the Company and the Company Subsidiaries (i) have no
Liability with respect to any misclassification of any Persons as an independent
contractor rather than as an employee, (ii) are in compliance with all
applicable foreign, federal, state and local Laws, rules and regulations
respecting employment, employment practices, labor relations, employment
discrimination, health and safety, terms and conditions of employment and wages
and hours, in each case, with respect to their employees, and (iii) have not
received any written remedial order or notice of offense under applicable
occupational health and safety Laws.
(b) The Company has not incurred in the last three years, and
does not reasonably expect to incur, any Liability or obligation under the
Worker Adjustment and Retraining Notification Act, and the regulations
promulgated thereunder (the "WARN Act"), or any similar state or local Law which
remains unsatisfied.
(c) In the three years preceding the date of this Agreement,
neither the Company nor any Company Subsidiary has: (i) given notice of
redundancies to the relevant Secretary of State or started consultations with a
trades union under Chapter II of Part IV of the Trade Union and Labour Relations
(Consolidation) Act 1992 or failed to comply with its obligations under Chapter
II of Part IV of that Act; or (ii) been a party to a relevant transfer (as
defined in the Transfer of Undertakings (Protection of Employment) Regulations
2006) or failed to comply with an obligation imposed by the foregoing.
Section 3.13 Real Property.
(a) Section 3.13(a) of the Company Disclosure Letter sets
forth by address a true, correct and complete list of all properties owned by
the Company or any of the Company Subsidiaries (the "Owned Real Property"). True
and complete copies of the most recent title reports, title policies and surveys
currently in the possession of the Company with respect to the Owned Real
Property located in Plainview, New York have been made available to Parent.
Except as would not, or would not reasonably be expected to, individually or in
the aggregate, have a Company Material Adverse Effect, (i) for each item of
Owned Real Property listed on Section 3.13(a) of the Company Disclosure Letter,
the Company or any of the Company Subsidiaries, as the case may be, has good and
valid fee title to the Owned Real Property free and clear of all Liens, except
for Permitted Liens; (ii) there are no pending or, to the knowledge of the
Company, threatened expropriation, condemnation or eminent domain proceedings,
lawsuits or administrative or other Actions relating to the Owned Real Property;
and (iii) except for the Company or the Company Subsidiaries, there are no
Persons in possession or occupancy of any part of the Owned Real Property or the
- 19 -
facilities located on the Owned Real Property or who have possessory rights with
respect to any part of the Owned Real Property.
(b) Section 3.13(b) of the Company Disclosure Letter sets
forth by address a true, correct and complete list of the real property leased
or subleased by the Company or any Company Subsidiary under leases or subleases
with remaining payments of at least $500,000 as of December 31, 2006 (each, a
"Leased Property", and collectively, the "Leased Properties"), with any guaranty
given by the Company or any Company Subsidiary in connection therewith. The
Company or one of the Company Subsidiaries has a valid leasehold interest in all
of the Leased Properties, free and clear of all Liens, except, (i) Liens for
Taxes, assessments and governmental charges or levies either not yet due and
payable or which are being contested in good faith and by appropriate
proceedings and for which appropriate reserves have been established to the
extent required by GAAP; (ii) mechanics, carriers', workmen's, warehouseman's,
repairmen's, materialmen's or other Liens or security interests that are not yet
due or that are being contested in good faith and by appropriate proceedings and
for which adequate reserves have been made if so required by GAAP; (iii) Liens
imposed by applicable Law (other than Tax Law); (iv) pledges or deposits to
secure obligations under workers' compensation Laws or similar legislation or to
secure public or statutory obligations; (v) pledges and deposits to secure the
performance of bids, trade contracts, leases, surety and appeal bonds,
performance bonds and other obligations of a similar nature, in each case in the
ordinary course of business; (vi) defects, imperfections or irregularities in
title, easements, covenants and rights of way (unrecorded and of record) and
other similar restrictions, and zoning, building and other similar codes or
restrictions, in each case that do not adversely affect in any material respect
the current use of the applicable property owned, leased, used or held for use
by the Company or any of the Company Subsidiaries; (vii) Liens the existence of
which are specifically disclosed in the notes to the consolidated financial
statements of the Company included in the Form 10-K/A or the Company's Quarterly
Reports on Form 10-Q for the periods ended September 30, 2006 or December 31,
2006; (viii) statutory, common law or contractual liens of landlords; or (ix)
all Liens and other imperfections of title (including matters of record) and
encumbrances that do not materially interfere with the conduct of the business
of the Company and the Company Subsidiaries, taken as a whole, or as would not,
or would not reasonably be expected to, individually or in the aggregate, have a
Company Material Adverse Effect (the items in clauses (i) through (ix),
collectively, "Permitted Liens"). True and complete copies of all agreements
under which the Company or any of the Company Subsidiaries leases or subleases
the Leased Properties (the "Leases") have been made available to Parent. Except
as would not, or would not reasonably be expected to, individually or in the
aggregate, have a Company Material Adverse Effect, (A) the Company or one of the
Company Subsidiaries has the right to the use and occupancy of the Leased
Properties, subject to the terms of the applicable Lease relating thereto and
Permitted Liens, and (B) the Leases are in full force and effect, all rent and
other sums and charges payable by the Company or one of the Company Subsidiaries
as tenant or subtenant thereunder are current or are being contested in good
faith by appropriate proceedings, no notice of default or termination is
outstanding, and, to the knowledge of the Company, no termination event or
condition or uncured default on the part of the Company or one of the Company
Subsidiaries has occurred, and, to the knowledge of the
- 20 -
Company, no event has occurred and no condition exists which, with the giving of
notice, the lapse of time or both, would constitute such a default or
termination event or condition.
(c) The Owned Real Property and the Leased Properties
constitute all of the real property and interests in real property used by the
Company or the Company Subsidiaries in connection with the businesses of the
Company and the Company Subsidiaries, respectively, except for leases or
subleases with remaining payments of less than $500,000 as of December 31, 2006.
Section 3.14 Intellectual Property.
(a) Except as would not, or would not reasonably be expected
to, individually or in the aggregate, have a Company Material Adverse Effect,
(i) the Company and the Company Subsidiaries own or have the valid right to use
all the Intellectual Property used in, or necessary to conduct the business of
the Company and the Company Subsidiaries as currently conducted, and (ii) to the
knowledge of the Company, the conduct of the business of the Company and the
Company Subsidiaries as currently conducted does not infringe, misappropriate or
violate ("Infringe") any Intellectual Property rights of any third party. Except
as would not, or would not reasonably be expected to, individually or in the
aggregate, have a Company Material Adverse Effect, no claim or demand has been
given in writing to the Company or any Company Subsidiary that the conduct of
the business of the Company or any Company Subsidiary Infringes or may infringe
the Intellectual Property rights of any third party (including any demand that
the Company or a Company Subsidiary must license or refrain from using any
Intellectual Property of a third party).
(b) Section 3.14(b) of the Company Disclosure Letter sets
forth: a true and complete list of all material registered trademarks and
registered service marks, trademark and service mark applications, copyright and
mask work registrations and applications, and patents and patent applications
currently owned by the Company and the Company Subsidiaries (collectively,
"Scheduled Intellectual Property"). Each item of the Scheduled Intellectual
Property has been duly registered or application filed with the U.S. Patent and
Trademark Office (the "PTO"), U.S. Copyright Office (the "Copyright Office"), or
other appropriate or equivalent Governmental Authority in other jurisdictions,
in each case as and to the extent so indicated on Section 3.14(b) of the Company
Disclosure Letter. Except as would not, or would not reasonably be expected to,
individually or in the aggregate, have a Company Material Adverse Effect, all
patent, copyright and trademark applications, renewals and other similar fees
have been properly paid and are current, and all patent, copyright and trademark
registrations and filings remain in full force and effect. To the knowledge of
the Company, there are no actual or threatened opposition proceedings,
reexamination proceedings, cancellation proceedings, interference proceedings or
other similar actions challenging the validity, existence or ownership of any
portion of the Scheduled Intellectual Property. To the knowledge of the Company,
none of the Scheduled Intellectual Property has been previously adjudged to be
invalid or unenforceable in whole or in part.
- 21 -
(c) Except as would not, or would not reasonably be expected
to, individually or in the aggregate, have a Company Material Adverse Effect,
with respect to the Intellectual Property rights that are owned by the Company
or any of the Company Subsidiaries (except for portions thereof that consist of
embedded third-party products licensed from others) that are material to the
business of the Company and the Company Subsidiaries, taken as a whole
(collectively, "Owned Intellectual Property"), to the knowledge of the Company,
no Person has or is engaged in any activity that has Infringed the Owned
Intellectual Property in any way that has a Company Material Adverse Effect.
Except as set forth in Section 3.14(c) of the Company Disclosure Letter and as
would not, or would not reasonably be expected to, individually or in the
aggregate, have a Company Material Adverse Effect, neither the Company nor any
Company Subsidiary has exclusively licensed any Owned Intellectual Property to
any Person (other than in the ordinary course of business).
(d) Section 3.14(d) of the Company Disclosure Letter sets
forth a true and complete list of all material third party software licenses
(other than licenses for "off-the-shelf" computer software, as such term is
commonly understood, and software licenses having aggregate licensing fees of
less than U.S.$100,000) that grant the Company or a Company Subsidiary a right
to use a third party's software.
(e) Except as would not, or would not reasonably be expected
to, individually or in the aggregate, have a Company Material Adverse Effect,
the Company and the Company Subsidiaries have taken commercially reasonable
actions to protect, preserve and maintain the Owned Intellectual Property and to
maintain the confidentiality and secrecy of and restrict the improper use of
confidential information, trade secrets and proprietary information under
applicable Law. Without limitation, such reasonable actions have included
maintaining and enforcing a policy of requiring employees and consultants to
enter into non-disclosure and intellectual property assignment agreements to the
extent that such employees or consultants have developed any Owned Intellectual
Property. To the knowledge of the Company, there has been no unauthorized
disclosure of any confidential information (including software source code
contained in Owned Intellectual Property) or trade secrets of the Company or any
Company Subsidiary that would or would reasonably be expected to, individually
or in the aggregate, have a Company Material Adverse Effect. To the knowledge of
the Company, except as disclosed in accordance with agreements containing such
confidentiality terms, no Person other than the Company and the Company
Subsidiaries is in possession of, nor has the Company or a Company Subsidiary
granted ownership rights in, any source code contained in Owned Intellectual
Property.
(f) For purposes of this Agreement, "Intellectual Property"
means the following and all rights pertaining thereto: (i) patents, patent
applications, provisional patent applications and statutory invention
registrations (including all utility models and other patent rights under the
laws of all countries and including any divisions, continuations,
continuations-in-part, reissues, reexaminations, or interferences thereof,
whether or not patents are issued on any such applications and whether or not
any such applications are modified, withdrawn, or resubmitted), (ii) trademarks,
service marks, trade dress, logos, trade names, service names, corporate names,
domain names and other
- 22 -
brand identifiers, registrations and applications for registration thereof,
(iii) copyrights, proprietary designs, Computer Software, mask works (including
their range of revision numbers, architectural layouts, circuit layouts,
simulation extractions and any other computer aided design file generated in
connection with the development of an integrated circuit, whether registered or
unregistered), databases, and registrations and applications for registration
thereof, (iv) confidential and proprietary information, trade secrets and
know-how (including production and design techniques enabling military and space
approved electronic devices) (v) all similar rights, however denominated,
throughout the world, and (vi) all rights to collect proceeds from the
foregoing, to enforce the foregoing and to collect damages related to such
enforcement. For purposes of this Agreement, "Computer Software" means computer
software and includes all source code, object code, executable, binary code and
firmware.
(g) Except as would not, or would not reasonably be expected
to, individually or in the aggregate, have a Company Material Adverse Effect (i)
the Company and the Company Subsidiaries have complied with all applicable
contractual requirements pertaining to information privacy and security, and
(ii) no written complaint relating to an unlawful use or disclosure of, or a
breach in the security of, any such information has been received by the Company
or any Company Subsidiary.
(h) Except as would not, or would not reasonably be expected
to, individually or in the aggregate, have a Company Material Adverse Effect,
the Computer Hardware that is used or held for use by the Company in the conduct
of its business is in good working condition (normal wear and tear excepted).
Except as would not, or would not reasonably be expected to, individually or in
the aggregate, have a Company Material Adverse Effect, there has not been any
malfunction with respect to the Computer Hardware since June 30, 2005 that has
not been remedied or replaced in all material respects. For purposes of this
Agreement, "Computer Hardware" means any computer hardware, equipment and
peripherals of any kind and of any platform, including desktop and laptop
personal computers, handheld computerized devices, servers, mid-range and
mainframe computers, process control and distributed control systems, and all
network and other communications and telecommunications equipment.
Section 3.15 Taxes.
(a) The Company and the Company Subsidiaries have (i) timely
filed or caused to be filed (taking into account any extension of time to file
validly granted or obtained) all income and other material Tax Returns required
to be filed by them, and such Tax Returns are true, correct and complete in all
material respects, and (ii) timely paid in full all material Taxes due and
payable (whether or not shown due on any Tax Return) except to the extent that
such Taxes are being contested in good faith and a reserve for such Taxes in
accordance with GAAP has been established on the Company's Balance Sheet. The
Liabilities and reserves for Taxes reflected on the Company's Balance Sheet has
been established in accordance with GAAP. There are no material Liens for Taxes
upon any property or asset of the Company or any of the Company Subsidiaries,
except for Liens for Taxes not yet due. All material Taxes
- 23 -
required to be withheld by the Company and the Company Subsidiaries have been
timely withheld and paid over to the appropriate Governmental Authority.
(b) The Company has delivered or otherwise made available to
Parent copies of all income Tax Returns filed for Tax years ending June 30,
2003, June 30, 2004, June 30, 2005 and June 30, 2006 requested by Parent, which
copies are correct and complete, and any amended federal income Tax returns
filed within the three-year period ending on the date hereof requested by
Parent, which copies are correct and complete.
(c) No deficiency for any material amount of Tax has been
asserted or assessed by any Governmental Authority in writing against the
Company or any Company Subsidiary (or, to the knowledge of the Company, has been
threatened or proposed in writing), except for deficiencies which have been
satisfied by payment, settled or withdrawn or which are being contested in good
faith and the amount of which is included in accordance with GAAP in the
reserves for Taxes on the Company's Balance Sheet.
(d) (i) There are no pending or, to the knowledge of the
Company, threatened audits, examinations, investigations or other proceedings
regarding Taxes or Tax Returns of the Company or any Company Subsidiary with
respect to which the Company or a Company Subsidiary has been notified in
writing and (ii) neither the Company nor any Company Subsidiary has waived any
statute of limitations regarding Taxes or Tax Returns or agreed to any extension
of time with respect to an assessment or deficiency for Taxes (other than
waivers and extensions which are no longer in effect). There are no powers of
attorney currently in effect with respect to any Tax matter of the Company or
any Company Subsidiary.
(e) For Tax years beginning after June 30, 2003, neither the
Company nor any Company Subsidiary (i) has "participated" (within the meaning of
Treasury Regulation Section 1.6011-4(c)(3)(i)(A)) in any "listed transaction"
within the meaning of Treasury Regulation Section 1.6011-4(b)(2)) or any similar
provision of state, local or foreign Law, (ii) has been subject to a written
claim by a Governmental Authority in a jurisdiction where the Company or any of
the Company Subsidiaries does not file Tax Returns or pay Taxes that it is or
may be subject to taxation by that jurisdiction, (iii) is required to include
any material amount in gross income for any period ending after the Closing Date
as a result of (A) a change in method of accounting under Section 481 of the
Code, (B) any intercompany transaction, (C) an installment sale or open
transaction disposition, or (D) a prepaid amount (or under any provision of Law
of any jurisdiction with similar consequences as any of (iii)(A) through
(iii)(D) above), in each case occurring prior to the Closing Date and except as
provided in the second lead-in paragraph in ARTICLE III, (iv) has constituted a
"distributing corporation" or a "controlled corporation" (within the meaning of
Section 355(a)(1)(A) of the Code) in a distribution of stock intended to qualify
for tax-free treatment under Section 355 of the Code (A) in the two years prior
to the date of this Agreement (or will constitute such a corporation in the two
years prior to the Closing Date) or (B) in a distribution that otherwise
constitutes part of a "plan" or " series of related transactions" (within the
- 24 -
meaning of Section 355(e) of the Code) in conjunction with the Merger, or (v)
received a private letter ruling from the IRS or any similar ruling from any
other Governmental Authority or is subject to a special arrangement with a
Governmental Authority regarding any Tax matter.
(f) Neither the Company nor any Company Subsidiary (i) has
been a member of an affiliated group filing a consolidated federal income tax
return (other than a group the common parent of which was the Company) since
July 1, 2001, (ii) has any Liability for the Taxes of any Person (other than the
Company or any Company Subsidiary) under Treasury regulation Section 1.1502-6
(or any similar provision of state, local or foreign Law), as a transferee,
successor, by contract, assumption, operation of Law or otherwise and (iii) is a
party to any indemnification, allocation or sharing agreement or other
arrangement with respect to Taxes (other than agreements among the Company and
the Company Subsidiaries and other than customary Tax indemnifications contained
in credit or other commercial lending agreements). Section 3.16 Environmental
Matters. Except as would not reasonably be expected to, individually or in the
aggregate, have a Company Material Adverse Effect, (i) to the knowledge of the
Company, there is and has been no release of Materials of Environmental Concern
that requires response action under applicable Environmental Law at, on or under
any of the properties currently owned, leased or operated by the Company or any
of the Company Subsidiaries or, during the period of the Company's or the
Company Subsidiaries' ownership, lease or operation thereof, formerly owned,
leased or operated by the Company or any of the Company Subsidiaries; (ii) there
are no written claims or notices pending or, to the knowledge of the Company,
issued to or threatened in writing against the Company or any of the Company
Subsidiaries alleging violations of or Liability under any Environmental Law;
and (iii) to the knowledge of the Company, there are no events, conditions or
circumstances that have resulted in, or are reasonably likely to result in,
obligations or Liabilities pursuant to, and the Company is in compliance with,
all applicable Environmental Laws.
Section 3.17 Specified Contracts.
(a) Except as would not, or would not reasonably be expected
to, individually or in the aggregate, have a Company Material Adverse Effect,
(i) each Specified Contract and Government Contract is a legal, valid and
binding obligation of the Company or a Company Subsidiary, as applicable, and,
to the Company's knowledge, each counterparty thereto, and is in full force and
effect and (ii) the Company and the Company Subsidiaries have performed and
complied with all obligations required to be performed or complied with by them
under each Specified Contract and Government Contract. There is no breach,
violation or default under any Specified Contract and Government Contract by the
Company or any of the Company Subsidiaries or, to the Company's knowledge, by
any counterparty, and no event has occurred that with the lapse of time or the
giving of notice or both would constitute a breach, violation or default
thereunder by the Company or any of the Company Subsidiaries, or, to the
Company's knowledge, by any counterparty, except which would not, or would not
reasonably be expected to, individually or in the aggregate, have a Company
Material
- 25 -
Adverse Effect. For purposes of this Section 3.17(a) and Section 3.17(d) below,
Specified Contracts will be deemed to include any Contract entered into after
the date hereof that would have been a Specified Contract had it been in effect
as of or prior to the date hereof.
(b) For purposes of this Agreement, the term "Specified
Contract" means any of the following Contracts (together with all exhibits,
schedules and amendments thereto) to which the Company or any Company Subsidiary
is a party:
(i) any limited liability company agreement, joint
venture or other similar agreement or arrangement with respect to any material
business of the Company and the Company Subsidiaries, taken as a whole, other
than any such limited liability company, partnership or joint venture that is a
wholly-owned Company Subsidiary;
(ii) any Contract or Contracts relating to or
evidencing Indebtedness (A) in an amount in excess of $500,000, individually or
in the aggregate, other than equipment leases entered into in the ordinary
course of business that do not exceed $1,000,000 in the aggregate or (B) any
Indebtedness in excess of $50,000 or any secured Indebtedness which, in each
case, cannot be prepaid at Closing without penalty, premium or notice;
(iii) any Contract filed as an exhibit to the
Company's Form 10-K/A pursuant to Item 601(b)(10) of Regulation S-K under the
Securities Act or disclosed by the Company in a Current Report on Form 8-K,
other than Plans disclosed in Section 3.11(a) of the Company Disclosure Letter;
(iv) any Contract that prohibits (or purports to
prohibit) the Company or the Company Subsidiaries or any Affiliate of the
Company (A) from materially competing in any line of business, (B) competing
with any Person or operate in any location or (C) from soliciting of the
customers or employees of any Person;
(v) any Contract that (A) contains most favored
customer pricing provisions with any third party (other than Contracts entered
into in the ordinary course of business consistent with past practice) or (B)
grants any exclusive rights, rights of first refusal, rights of first
negotiation or similar rights to any Person, in the case of each of (A) and (B)
in a manner which is material to the business of the Company and the Company
Subsidiaries, taken as a whole;
(vi) any Contract not yet consummated for the
acquisition or disposition, directly or indirectly (by merger or otherwise), of
assets or capital stock or other equity interests of any Person for aggregate
consideration under such Contract in excess of $1,000,000 individually, or
$5,000,000 in the aggregate;
- 26 -
(vii) any Contract of the type that would be required
to be disclosed under Item 404 of Regulation S-K under the Securities Act
between or among the Company or a Company Subsidiary, on the one hand, and any
of their respective Affiliates (other than the Company or any Company
Subsidiary), on the other hand, that involves amounts of more than $100,000;
(viii) any acquisition Contract pursuant to which the
Company or any of the Company Subsidiaries has or may have continuing
indemnification, "earn-out" or contingent payment obligations, whether or not
disputed, that, individually or in the aggregate, could result in payments in
excess of $500,000;
(ix) any Contract that, individually or in the
aggregate, would, or would reasonably be expected to, prevent or materially
delay the Company's ability to consummate the Merger or the Other Transactions;
(x) any Contract that contains a put, call, right of
first refusal or similar right pursuant to which the Company or any Company
Subsidiary would be required to purchase or sell, as applicable, any ownership
interests of any Person for an aggregate consideration under such Contract in
excess of $1,000,000; or
(xi) any Contracts containing minimum purchase
conditions in excess of $1,000,000 or requirements or other terms that
materially restrict or limit the purchasing relationships of the Company or the
Company Subsidiaries, or any customer, licensee or lessee thereof.
(c) A true and complete list of the Specified Contracts (other
than Contracts relating to Intellectual Property) referred to in clause (b)
above is set forth in Section 3.17(c) of the Company Disclosure Letter. The
Company has made available to Parent, as of the date hereof, true and correct
copies of each Specified Contract.
(d) With respect to each Contract, bid or proposal between the
Company or any of the Company Subsidiaries and any (i) Governmental Authority,
including any facilities contract for the use of government-owned facilities or
(ii) third party relating to a Contract with any Governmental Authority (each a
"Government Contract"), (A) the Company and each of the Company Subsidiaries
have complied with all terms and conditions of such Government Contract,
including all clauses, provisions and requirements incorporated expressly by
reference, or by operation of law therein; (B) the Company and each of the
Company Subsidiaries have complied with all requirements of all applicable Laws,
or agreements pertaining to such Government Contract, including where applicable
the "Cost Accounting Standards" disclosure statement of the Company or such
Company Subsidiary; (C) all representations and certifications executed,
acknowledged or set forth in or pertaining to such Government Contract were
complete and correct as of their effective dates and the Company and the Company
Subsidiaries have complied with all such representations and certifications;
- 27 -
(D) neither the United States government nor any prime contractor,
subcontractor, vendor or other Person who is a party to a Government Contract
has notified the Company or any of the Company Subsidiaries that the Company or
any of the Company Subsidiaries has breached or violated any Laws,
certification, representation, clause, provision or requirement pertaining to
such Government Contract; (E) neither the Company nor any of the Company
Subsidiaries has received any notice of termination for convenience, notice of
termination for default, cure notice, show cause or notice pertaining to such
Government Contract; (F) no cost incurred by the Company or any of the Company
Subsidiaries pertaining to such Government Contract has been questioned or
challenged, is the subject of any audit (other than routine cost incurred
audits) or investigation or has been disallowed by any Governmental Authority;
and (G) no payments due to the Company or any of the Company Subsidiaries
pertaining to such Government Contract have been withheld or set off, nor has
any claim been made to withhold or set off money, and the Company and the
Company Subsidiaries are entitled to all progress or other payments received
with respect thereto, except for any such failure, noncompliance, inaccuracy,
breach, violation, termination, withholding, cost, investigation, disallowance
or payment or other action contemplated by clauses (A) through (G) above that
would not, or would not reasonably be expected to, individually or in the
aggregate, have a Company Material Adverse Effect.
(e) To the Company's knowledge, neither the Company nor any of
the Company Subsidiaries or any of their respective directors, officers,
employees, consultants or agents is or since July 1, 2004 has been under (i) any
civil or criminal investigation or indictment by any Governmental Authority or
(ii) material administrative investigation or material audit by any Governmental
Authority, in either case with respect to any alleged improper act or omission
arising under or relating to any Government Contract.
(f) There exist (i) no outstanding claims against the Company
or any of the Company Subsidiaries, either by any Governmental Authority or by
any prime contractor, subcontractor or vendor or other Person who is a party to
a Government Contract, arising under or relating to any Government Contract, and
(ii) no disputes between the Company or any of the Company Subsidiaries and the
United States government under the Contract Disputes Act, as amended, or any
other federal statute, or between the Company or any of the Company Subsidiaries
and any prime contractor, subcontractor or vendor that is party to a Government
Contract arising under or relating to any Government Contract which would or
would reasonably be expected to, in the case of (i) or (ii), individually or in
the aggregate, have a Company Material Adverse Effect. To the Company's
knowledge, neither the Company nor any of the Company Subsidiaries has any
Liability in respect of any pending claim against any prime contractor,
subcontractor or vendor arising under or relating to any Government Contract
that would or would reasonably be expected to, individually or in the aggregate,
have a Company Material Adverse Effect.
(g) Since July 1, 2004, neither the Company nor any of the
Company Subsidiaries has been determined not to be a responsible party or been
debarred or suspended from participation in the award of contracts with the
United States
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government or any other Governmental Authority (excluding, for this purpose,
ineligibility to bid on certain contracts due to generally applicable bidding
requirements). To the Company's knowledge, there exist no facts or circumstances
that would warrant the institution of suspension or debarment proceedings or the
finding of non-responsibility or ineligibility on the part of the Company, any
of the Company Subsidiaries or any of their respective directors, officers or
employees which would or would reasonably be expected to, individually or in the
aggregate, have a Company Material Adverse Effect.
Section 3.18 Insurance. Section 3.18 of the Company Disclosure Letter
sets forth a complete and correct list of all insurance policies owned or held
by the Company and each Company Subsidiary and all such policies have been made
available to Parent. With respect to each such insurance policy, except as would
not, or would not reasonably be expected to, individually or in the aggregate,
have a Company Material Adverse Effect: (i) except for policies that have
expired under their terms in the ordinary course and have been replaced by
policies with substantially similar coverage, the policy is in full force and
effect; (ii) neither the Company nor any Company Subsidiary is in material
breach or default (including any such breach or default with respect to the
payment of premiums or the giving of notice), and, to the Company's knowledge,
no event has occurred which, with notice or the lapse of time, would constitute
such a breach or default, or permit termination or modification, under the
policy; (iii) to the knowledge of the Company, no insurer on the policy has been
declared insolvent or placed in receivership, conservatorship or liquidation;
and (iv) to the knowledge of the Company, no notice of cancellation or
termination has been received other than in connection with ordinary renewals.
Section 3.19 Board Approval; Vote Required.
(a) The Company Board by resolutions duly adopted at a meeting
duly called and held, which resolutions, subject to Section 6.04, have not been
subsequently rescinded, modified or withdrawn in any way, has by unanimous vote
of those directors present (who constituted 100% of the directors then in office
and duly elected, subject to the terms and conditions set forth herein, has (i)
determined that the Merger is advisable and in the best interests of the
Company's stockholders, (ii) approved this Agreement, the Merger and the Other
Transactions and (iii) recommended approval and adoption of this Agreement and
the Merger. The approval of this Agreement by the Company Board constitutes
approval of this Agreement, the Merger and the other transactions contemplated
hereby for purposes of Section 203 of the DGCL ("Section 203") and for all
provisions of the Company's certificate of incorporation and bylaws and
represents the only action necessary to ensure that the restrictions of Section
203 (and the restrictions in the Company's certificate of incorporation and
bylaws) do not apply to the execution and delivery of this Agreement or the
consummation of the Merger and the Other Transactions. No "fair price,"
"moratorium," "control share acquisition," or other similar anti-takeover
statute or regulation enacted under state or federal Laws in the United States
(with the exception of Section 203) applicable to the Company is applicable to
this Agreement or the Merger or the Other Transactions. On May 25, 2007, the
Company provided a notice of termination as of
- 29 -
such date (the "Termination Notice") to AF Holdings, Inc. ("AFH") and AF Merger
Sub, Inc. ("AFMS") of the Agreement and Plan of Merger, dated as of March 2,
2007, by and among the Company, AFH and AFMS (the "Prior Agreement") and in
connection with such termination, paid on such date to AFH $22.5 million in
respect of the Breakup Fee (as defined in the Prior Agreement). The Company
Board determined on April 18, 2007 that The Veritas Capital Fund III, L.P.
(together with its affiliates and co-investors) was an Excluded Party (as
defined in the Prior Agreement) and determined on the Termination Date that the
Acquisition Proposal (as defined in the Prior Agreement) reflected in the terms
of this Agreement constitutes a Superior Proposal (as defined in the Prior
Agreement) and that The Veritas Capital Fund III, L.P. (together with its
affiliates and co-investors) is an Excluded Party (as defined in the Prior
Agreement) and has not withdrawn, modified or rescinded any such determinations
in any manner. Immediately prior to the sending of the Termination Notice to AFH
and AFMS, the Company was not in breach of, had not previously breached and,
except as set forth on Section 3.19(a) of the Company Disclosure Letter, the
Company has not received any notice of any allegation of breach of the Prior
Agreement and there were no other Excluded Parties.
(b) The only vote of the holders of any class or series of
capital stock or other securities of the Company necessary to adopt this
Agreement or consummate the Merger or the Other Transactions under the DGCL,
under the Company's certificate of incorporation or bylaws or under any other
applicable Law, Contract to which the Company is a party or constituent document
is the affirmative vote of the holders of a majority of the outstanding shares
of Company Common Stock entitled to vote in favor of the adoption of this
Agreement (the "Stockholder Approval").
Section 3.20 Company Stock Options. The Company Board by resolutions
duly adopted at a meeting duly called and held, which resolutions have not been
subsequently rescinded, modified or withdrawn in any way, subject to the terms
and conditions set forth herein, has resolved that, pursuant to its authority
under the Company Stock Option Plans, each Company Stock Option outstanding at
the Effective Time shall, from and after the Effective Time, represent as of the
Effective Time solely the right to receive, in accordance with Section 2.03, a
lump sum cash payment in the amount of the Option Consideration, if any, with
respect to such Company Stock Option, which resolutions are set forth in Section
3.20 of the Company Disclosure Letter.
Section 3.21 Rights Agreement. The Company has delivered or made
available to Parent a correct and complete copy of the Company's shareholders'
rights agreement, dated as of August 13, 1998, as amended (the "Rights Plan"),
including all exhibits thereto. The Company has taken all necessary action so
that neither the execution and delivery of this Agreement nor the consummation
of the Merger or the Other Transactions will (i) cause the rights granted under
the Rights Plan to become exercisable, (ii) cause Parent or Merger Sub, or any
Affiliate of Parent or Merger Sub, to become an Acquiring Person or (iii) give
rise to a "Distribution Date" (as defined in the Rights Plan) or other
triggering event under the Rights Plan. The Company has taken all necessary
action so that the March 2, 2007 amendment to the Rights Plan enacted in
connection with the Prior Agreement shall be of no further force and effect as
of the date of this Agreement.
- 30 -
Section 3.22 Relationships. Since June 30, 2006 through the date of
this Agreement, no customer that is material to the Company and the Company
Subsidiaries, taken as a whole, and no supplier or service provider that is
material to the Company and the Company Subsidiaries, taken as a whole, is
involved in, or to the knowledge of the Company, is threatening, a material
dispute with the Company or the Company Subsidiaries.
Section 3.23 Opinion of Financial Advisors. The Company Board has
received the separate opinions of Bear, Stearns & Co. Inc. and Banc of America
Securities LLC, each to the effect that, as of the date thereof and based upon
and subject to the matters set forth therein, the Merger Consideration to be
received by the holders of Company Common Stock (other than as specified in the
opinions) is fair, from a financial point of view, to such holders. An executed
copy of each such opinion will be delivered to Parent and Merger Sub solely for
information purposes. The Company may, subject to the approval of the firm
rendering such opinion as set forth in such firm's engagement letter with the
Company, include a copy of such written opinion in the Proxy Statement.
Section 3.24 Brokers. Except for Bear, Stearns & Co. Inc., Banc of
America Securities LLC and Thomas Weisel Partners LLC, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of the Company. The Company has made available
to Parent a true and complete copy of all Contracts between (or binding upon)
the Company or any Company Subsidiary and Bear, Stearns & Co. Inc., Banc of
America Securities LLC and Thomas Weisel Partners LLC.
Section 3.25 No Other Information. Except as set forth in this
Agreement, the Company acknowledges that neither Parent nor Merger Sub make any
representations or warranties as to any matter whatsoever except as expressly
set forth in this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
-------------------------------------------------------
Concurrently with the execution and delivery of this Agreement, Parent
and Merger Sub have delivered to the Company a letter (the "Parent Disclosure
Letter") setting forth, among other things, items the disclosure of which is
necessary either in response to an express disclosure requirement contained in a
provision hereof or as an exception to one or more of the representations and
warranties of Parent and Merger Sub contained in this ARTICLE IV. Each of Parent
and Merger Sub, jointly and severally, hereby represents and warrants to the
Company that:
Section 4.01 Corporate Organization. Each of Parent and Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization and has the requisite corporate power
and authority to
- 31 -
own, lease and operate its properties and to carry on its business as it is now
being conducted, except where the failure to be so organized, existing or in
good standing or to have such power authority and governmental approvals would
not, individually or in the aggregate, prevent or materially delay consummation
of the Merger or otherwise prevent or materially delay either Parent or Merger
Sub from performing its obligations under this Agreement.
Section 4.02 Certificate of Incorporation and Bylaws. Each of Parent
and Merger Sub has heretofore furnished to the Company a complete and correct
copy of its certificate of incorporation and bylaws, as in effect as of the date
of this Agreement. Such certificates of incorporation and bylaws are in full
force and effect.
Section 4.03 Authority Relative to this Agreement. Each of Parent and
Merger Sub has all necessary corporate or other power and authority to execute
and deliver this Agreement, to perform its obligations hereunder and to
consummate the Merger, the Other Transactions and the Financing. The execution,
delivery and performance of this Agreement by each of Parent and Merger Sub and
the consummation by each of Parent and Merger Sub of the Merger, the Other
Transactions and the Financing have been duly and validly authorized by all
necessary corporate or other action, and no other corporate or other actions on
the part of Parent or Merger Sub are necessary to authorize this Agreement or to
consummate the Merger, the Other Transactions or the Financing. This Agreement
has been duly and validly executed and delivered by each of Parent and Merger
Sub and, assuming due authorization, execution and delivery by the Company,
constitutes a legal, valid and binding obligation of each of Parent and Merger
Sub, enforceable against each of Parent and Merger Sub in accordance with its
terms, subject to the effect of any general principles of equity, whether
applied in a court of law or a court of equity, and by bankruptcy, insolvency
and similar Laws affecting creditors' rights and remedies generally, including
all Laws relating to fraudulent transfers.
Section 4.04 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by each of
Parent and Merger Sub do not, and the performance of this Agreement by each of
Parent and Merger Sub and the consummation by each of Parent and Merger Sub of
the Merger, the Other Transactions and the Financing will not, (i) contravene,
conflict with, violate or result in a breach of the respective certificates of
incorporation or bylaws of Parent or Merger Sub, (ii) assuming that all
consents, approvals, authorizations and other actions described in Section
3.05(b) and Section 4.04(b) have been obtained and all filings and obligations
described in Section 4.04(b) have been made, conflict with or violate any Law
applicable to either Parent or Merger Sub, or (iii) result in any breach or
violation of, or constitute a default (or an event which, with notice or lapse
of time or both, would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a Lien on any property or asset of either Parent or Merger Sub
pursuant to any Contract to which either Parent or Merger Sub is a party or by
which either Parent or Merger Sub is bound or affected, except, with respect to
clauses (ii) and (iii), for any such conflicts, violations, breaches, defaults
or
- 32 -
other occurrences which would not, individually or in the aggregate, prevent or
materially delay consummation of the Merger or otherwise prevent or materially
delay Parent or Merger Sub from performing their material obligations under this
Agreement.
(b) Assuming the accuracy of the representations and
warranties of the Company contained in Section 3.05(b) of this Agreement, the
execution and delivery of this Agreement by each of Parent and Merger Sub do
not, and the performance of this Agreement by each of Parent and Merger Sub and
the consummation by each of Parent and Merger Sub of the Merger, the Other
Transactions and the Financing will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Authority, except for (i) applicable requirements, if any, of the Exchange Act,
(ii) the pre-merger notification requirements of the HSR Act and the competition
or merger control Laws of any other applicable jurisdiction, (iii) the filing
and recordation of appropriate merger documents as required by the DGCL and
appropriate documents with the relevant authorities of other states in which the
Company or any of the Company Subsidiaries is qualified to do business, (iv) the
filing and clearance by the SEC of the Proxy Statement and (v) where the failure
to obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not, individually or in the aggregate, prevent
or materially delay consummation of the Merger or otherwise prevent or
materially delay either Parent or Merger Sub from performing its material
obligations under this Agreement.
Section 4.05 Absence of Litigation. There is no Action pending or, to
the knowledge of Parent and Merger Sub, threatened, against either Parent or
Merger Sub before any Governmental Authority that would or seeks to materially
delay or prevent the consummation of the Merger. Neither Parent nor Merger Sub
is subject to any continuing order of, consent decree, settlement agreement or
other similar written agreement with, or, to the knowledge of Parent and Merger
Sub, continuing investigation by, any Governmental Authority, or any order,
writ, judgment, injunction, decree, determination or award of any Governmental
Authority that would or seeks to materially delay or prevent the consummation of
the Merger.
Section 4.06 Operations of Merger Sub and Parent; Ownership of Company
Common Stock. Parent and Merger Sub were each formed solely for the purpose of
engaging in the transactions contemplated hereby (including the Financing), have
engaged in no other business activities, and have conducted their operations
only as contemplated by this Agreement. Parent has no subsidiaries other than
Merger Sub and Merger Sub has no subsidiaries. Except as contemplated by any
Rollover Commitment, no shares of Company Common Stock are held by Parent,
Merger Sub, Guarantors or any direct or indirect wholly owned subsidiary of
Parent, Merger Sub or Guarantors.
Section 4.07 Financing. Parent has delivered to the Company true and
complete copies of (a) executed commitment letters from each of the Guarantors
addressed to Parent to provide equity financing in an aggregate amounts set
forth therein (the "Equity Commitment Letters"), (the "Equity Financing") and
(b) executed commitment letters as set forth in Section 4.07 of the Parent
Disclosure Letter, (collectively, the "Debt Commitment Letters") (collectively,
the "Debt Financing," and
- 33 -
together with the Equity Financing being collectively referred to as the
"Financing"). None of the Equity Commitment Letters or Debt Commitment Letters
(collectively, the "Financing Commitments" ) has been amended or modified except
as permitted by this Agreement, and the respective commitments contained in the
Equity Commitment Letters and, to the knowledge of Parent as of the date of this
Agreement, the Debt Commitment Letters have not been withdrawn or rescinded in
any respect. The Equity Commitment Letters and, to the knowledge of Parent as of
the date of this Agreement, the Debt Commitment Letters are in full force and
effect. There are no conditions precedent or other contingencies related to the
funding of the full amount of the Financing, other than as set forth in or
contemplated by the Financing Commitments and the ability of the Parent's
financing sources to exercise their market flex. The aggregate proceeds
contemplated by the Financing Commitments will be sufficient for Parent and/or
Merger Sub to pay the aggregate Merger Consideration and any other repayment or
refinancing of debt contemplated by the Debt Commitment Letters and to pay all
related fees and expenses. As of the date of this Agreement, and assuming the
accuracy of the representations and warranties of the Company set forth in this
Agreement, to Parent's knowledge, all of the conditions to the Financing are
capable of being satisfied on the Closing Date. As of the date of this
Agreement, no event has occurred which, with or without notice, lapse of time or
both, would constitute a default or breach on the part of Parent or Merger Sub
under any term or condition of the Financing Commitments. Parent has fully paid
any and all commitment fees that have been incurred and are due and payable in
connection with the Financing Commitments, and Parent will pay when due all
other commitment fees arising under the Debt Commitment Letters as and when they
become payable.
Section 4.08 Guarantees. Concurrently with the execution of this
Agreement, Parent has delivered to the Company the Guarantees, each dated the
date hereof and executed by the relevant Guarantor, in favor of the Company with
respect to the performance by Parent and Merger Sub, respectively, of their
obligations under this Agreement.
Section 4.09 Brokers. Unless the Closing occurs and except as
contemplated by Section 8.03, the Company shall not be responsible for any
brokerage, finder's or other fee or commission to any broker, finder or
investment banker in connection with the transactions contemplated hereby based
upon arrangements made by or on behalf of either Parent or Merger Sub.
Section 4.10 No Other Information. Except as set forth in this
Agreement, Parent and Merger Sub acknowledge that the Company makes no
representations or warranties as to any matter whatsoever except as expressly
set forth in this Agreement, including with respect to any projections,
estimates or budgets discussed with, delivered to or made available to Parent
and Merger Sub or to any of their respective Affiliates or any representatives
of future revenues, future results of operations (or any component thereof),
future cash flows or future financial condition (or any component thereof) of
the Company and the Company Subsidiaries or of the future business and
operations of the Company and the Company Subsidiaries.
- 34 -
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
--------------------------------------
Section 5.01 Conduct of Business by the Company Pending the Merger. The
Company agrees that, between the date of this Agreement and the Effective Time,
except as expressly contemplated by this Agreement or as set forth in Section
5.01 of the Company Disclosure Letter, without the prior written consent of
Parent and Merger Sub (which consent shall not be unreasonably withheld,
conditioned or delayed, provided, that with respect to Section 5.01(l), such
consent shall be in Parent's sole discretion), the businesses of the Company and
the Company Subsidiaries shall be conducted in all material respects in the
ordinary course of business and in a manner consistent with past practice, and
the Company shall, and shall cause each of the Company Subsidiaries to, use its
reasonable best efforts consistent with past practice to preserve in all
material respects its business organization, to preserve its assets and
properties in good repair and condition, to maintain capital expenditure levels
consistent with past practices, to keep available the services of its present
officers and to preserve in all material respects its current relationships with
customers, suppliers, employees and other Persons with which the Company or any
Company Subsidiary has material business relations, in each case in the ordinary
course of business and in a manner consistent with past practice. Without
limiting the generality of the foregoing, except as contemplated by any other
provision of this Agreement or as set forth in Section 5.01 of the Company
Disclosure Letter, the Company agrees that neither it nor any Company Subsidiary
shall, between the date of this Agreement and the Effective Time, directly or
indirectly, do any of the following, except with the prior written consent of
Parent and Merger Sub (which consent shall not be unreasonably withheld,
conditioned or delayed, provided, that with respect to Section 5.01(l), such
consent shall be in Parent's sole discretion):
(a) amend or otherwise change the certificate of incorporation
or bylaws of the Company, or such similar organization or governing documents of
the Company Subsidiaries;
(b) issue, deliver, sell, transfer, dispose of, pledge or
encumber any shares of its capital stock or equity interests, any other voting
securities or any securities convertible into, or any rights, warrants or
options to acquire, any such shares of capital stock or equity interests, voting
securities or convertible securities, other than the issuance of shares of
Company Common Stock issuable pursuant to Company Stock Options outstanding on
the date hereof and set forth in Section 3.03(a)(i) of the Company Disclosure
Letter or as required pursuant to any agreements set forth in Section 3.03(a) or
Section 3.03(b) of the Company Disclosure Letter;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
of its capital stock or equity interests, except for dividends by any
wholly-owned Company Subsidiary to the Company or any other wholly-owned Company
Subsidiary;
- 35 -
(d) reclassify, combine, split, subdivide or redeem, or
purchase or otherwise acquire, directly or indirectly, any capital stock or
equity interests of the Company or any Company Subsidiary;
(e) (i) acquire (including by merger, consolidation, or
acquisition of stock or assets or any other business combination) any
corporation, partnership, other business or business organization, any division
or business unit thereof or any material assets; (ii) incur, create, assume,
issue, guarantee or otherwise become liable for any Indebtedness, or permit the
creation of any Lien (other than Permitted Liens) on any of their respective
assets or other material Liability or issue any debt securities or any right to
acquire debt securities or assume, guarantee, endorse or otherwise become
responsible or liable for the obligations of any other Person; (iii) enter into
any new line of business; (iv) other than in the ordinary course of business,
make any loans, advances or capital contributions to, or investments in, Persons
other than wholly-owned Company Subsidiaries; or (v) other than licenses granted
in the ordinary course of business and consistent with past practice, sell,
lease, license, encumber or otherwise dispose of or transfer (by merger,
consolidation, sale of stock or assets or otherwise) any of its assets;
(f) make or commit to make any capital expenditure, other than
in respect of those capital expenditure projects that are incurred in the
ordinary course of business;
(g) adopt or enter into a plan of complete or partial
liquidation, dissolution, restructuring, recapitalization or other
reorganization of the Company or any Company Subsidiary (other than the Merger);
(h) (i) increase the salary, wages, benefits, bonuses or other
compensation payable or to become payable to its current or former directors,
officers or employees, except for increases required under employment agreements
or collective bargaining agreements existing on the date hereof and disclosed to
Parent, (ii) enter into or amend or otherwise alter any employment, change of
control or severance agreement with, or establish, adopt, enter into or amend
any Plan, bonus, profit sharing, thrift, stock option, restricted stock,
pension, retirement, welfare, deferred compensation, employment, change of
control, termination, severance or other benefit plan, agreement, policy or
arrangement for the benefit of, any current or former director, officer or
employee, (iii) exercise any discretion to accelerate the vesting or payment of
any compensation or benefit under any Plan, (iv) except as required pursuant to
any agreements set forth in Section 3.03(a) or Section 3.03(b) of the Company
Disclosure Letter, grant any new awards under any Plan, or (v) take any action
to fund the payment of compensation or benefits under any Plan except, in the
case of clauses (i), (ii) and (v), in the ordinary course of business,
consistent with past practices with respect to employees that are not officers
or directors, or as may be required by the terms of any such plan, agreement,
policy or arrangement in effect on the date hereof or disclosed to Parent or to
comply with applicable Law;
- 36 -
(i) make any change to its methods of accounting in effect as
of June 30, 2006, except as required by changes in GAAP;
(j) make or change any material Tax election, settle or
compromise any material Tax Liability, change in any material respect any
accounting method in respect of Taxes, file any amendment to, an income or other
material Tax Return, enter into any closing agreement with respect to, or
settle, any material claim or material assessment in respect of Taxes, or
consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes, except, in each case, in the ordinary
course of business consistent with past practice;
(k) write up, write down or write off the book value of any of
its assets, other than (i) in the ordinary course of business and consistent
with past practice or (ii) as may be required by GAAP;
(l) waive, settle, satisfy or compromise any material Action
(which shall in any event include, but not be limited to, any pending or
threatened Action and any legal proceedings arising out of or related to the
termination of the Prior Agreement, this Agreement or the transactions
contemplated thereby), including any claim related to the matters set forth in
Section 5.01(l) of the Company Disclosure Letter;
(m) enter into any agreement that restricts the ability of the
Company or any of the Company Subsidiaries or any Affiliate of the Company to
engage or compete in any line of business or any market;
(n) other than in the ordinary course of business and on terms
not materially adverse to the Company and the Company Subsidiaries taken as a
whole, enter into, amend, modify, cancel or consent to the termination of any
Specified Contract, Government Contract or any Contract that would be a
Specified Contract or Government Contract if in effect on the date of this
Agreement;
(o) enter into, renew or amend in any material respect any
transaction, agreement, arrangement or understanding (i) between (A) the Company
or any Company Subsidiaries, on the one hand, and (B) any Affiliate of the
Company (other than any of the Company Subsidiaries), on the other hand, of the
type that would be required to be disclosed under Item 404 of Regulation S-K
under the Securities Act, or (ii) that is set forth (or of the type required to
be set forth) on Section 3.08 of the Company Disclosure Letter;
(p) (i) assign, transfer, license or sublicense, mortgage,
pledge or otherwise similarly encumber (except for Permitted Liens) or dispose
of any material Intellectual Property, except for non-exclusive licenses or
non-exclusive sublicenses of Owned Intellectual Property in the ordinary course
of business, (ii) fail to pay any fee, take any reasonable action or make any
filing necessary to maintain its ownership of the Owned Intellectual Property or
that is reasonably likely to result in the forgoing being invalidated,
abandoned, unmaintained, unenforceable or dedicated to the public domain; or
(iii) fail to notify Parent promptly if (A) it knows or is advised that any
Owned
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Intellectual Property is reasonably likely to become abandoned or dedicated to
the public domain, or (B) it or any of the Company Subsidiaries receives notice
of any adverse determination or development regarding Owned Intellectual
Property (including the institution of, or any such determination or development
in, any proceeding in the PTO, Copyright Office or any other Governmental
Authority);
(q) engage in any "listed transaction," within the meaning of
Treasury Regulation Section 1.6011-4(b)(2);
(r) take any action that would or would reasonably be expected
to, individually or in the aggregate, have a Company Material Adverse Effect;
(s) take any action or omit to take any action that would or
would reasonably be likely to result in the breach of or inaccuracy in any
material respect of any of the representations and warranties set forth in
ARTICLE III;
(t) except in the ordinary course of business and as would
not, or would not reasonably be expected to, individually or in the aggregate,
have a Company Material Adverse Effect, cancel, surrender, allow to expire or
fail to renew, any Company Permits;
(u) fail to use reasonable best efforts to prevent any
material insurance policy naming it as a beneficiary or loss-payable payee to be
cancelled or terminated, except for ordinary course terminations and
cancellations of such policies that are being replaced with policies providing
for substantially equivalent coverage; or
(v) announce an intention, enter into any formal or informal
agreement or otherwise make a commitment or offer, to do any of the foregoing.
Nothing set forth in this Section 5.01 shall give Parent or Merger Sub, directly
or indirectly, the right to control or direct the business or operations of the
Company or any of the Company Subsidiaries prior to the Effective Time. Prior to
the Effective Time, the Company shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision over the business
and operations of the Company and the Company Subsidiaries.
ARTICLE VI
COVENANTS OF THE PARTIES
Section 6.01 Proxy Statement; Other Filings.
(a) The Company shall take whatever actions are necessary to
withdraw and terminate the proxy statement filed April 26, 2007 with respect to
the Prior Agreement.
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(b) (i) The Company shall prepare and file with the SEC as
promptly as practicable (and in any event use reasonable best efforts to file
within 30 days after the date of this Agreement), the preliminary Proxy
Statement and (ii) as promptly as reasonably practical, each of the Company,
Parent and Merger Sub shall, or shall cause their respective Affiliates to,
prepare and file with the SEC all other documents that are required to be filed
by such party in connection with the transactions contemplated hereby (the
"Other Filings"). Each of the Company, Parent and Merger Sub shall promptly
obtain and furnish all information concerning itself and its Affiliates that is
required to be included in the Proxy Statement or, to the extent applicable, the
Other Filings, or that is customarily included in proxy statements or other
filings prepared in connection with transactions of the type contemplated by
this Agreement. Each of the Company, Parent and Merger Sub shall use its
reasonable best efforts to respond as promptly as practicable to any comments of
the SEC with respect to the Proxy Statement or the Other Filings, and the
Company shall use its reasonable best efforts to cause the definitive Proxy
Statement to be mailed to the Company's stockholders as promptly as reasonably
practicable after the SEC clears the Proxy Statement. Each party shall promptly
notify the other parties upon the receipt of any comments from the SEC or its
staff or any request from the SEC or its staff for amendments or supplements to
the Proxy Statement or the Other Filings and shall provide the other parties
with copies of all correspondence between it and its representatives, on the one
hand, and the SEC and its staff, on the other hand, relating to the Proxy
Statement or the Other Filings. If, at any time prior to the Effective Time, any
information relating to the Company, Parent, Merger Sub or any of their
respective Affiliates, officers or directors, should be discovered by the
Company, Parent or Merger Sub which should be set forth in an amendment or
supplement to the Proxy Statement or the Other Filings, so that the Proxy
Statement or the Other Filings shall not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading, the party that
discovers such information shall promptly notify the other parties, 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. Notwithstanding anything to the contrary stated
above, prior to filing or mailing the Proxy Statement (or filing the Other
Filings (or, in each case, any amendment or supplement thereto)) or responding
to any comments of the SEC with respect thereto, the Company shall provide
Parent and Merger Sub an opportunity to review and comment on the Proxy
Statement and shall include in the Proxy Statement comments reasonably proposed
by Parent and Merger Sub.
(c) The Proxy Statement and the Other Filings that are filed
by the Company will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations promulgated
thereunder. The Company hereby covenants and agrees that none of the information
included or incorporated by reference in the Proxy Statement or in the Other
Filings to be made by the Company will, in the case of the Proxy Statement, at
the date it is first mailed to the Company's stockholders or at the time of the
Company Stockholders' Meeting or at the time of any amendment or supplement
thereof, or, in the case of any Other Filing, at the date it is first mailed to
the Company's stockholders or at the date it is first filed with the SEC,
contain
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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, except that no covenant is made by the Company with respect to
statements made or incorporated by reference therein based on information
supplied by Parent or Merger Sub or any Affiliate of Parent or Merger Sub in
connection with the preparation of the Proxy Statement or the Other Filings for
inclusion or incorporation by reference therein. Parent and Merger Sub hereby
covenant and agree that none of the information supplied by Parent or Merger Sub
or any Affiliate of Parent or Merger Sub for inclusion or incorporation by
reference in the Proxy Statement or the Other Filings will, in the case of the
Proxy Statement, at the date it is first mailed to the Company's stockholders or
at the time of the Company Stockholders' Meeting or at the time of any amendment
or supplement thereof, or, in the case of any Other Filing, at the date it is
first mailed to the Company's stockholders or, at the date it is first filed
with the SEC, 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. No covenant is made by either Parent or Merger Sub with respect
to statements made or incorporated by reference therein based on information
supplied by the Company in connection with the preparation of the Proxy
Statement or the Other Filings for inclusion or incorporation by reference
therein. All Other Filings that are filed by Parent or Merger Sub will comply as
to form in all material respects with the requirements of the Exchange Act and
the rules and regulations promulgated thereunder.
Section 6.02 Company Stockholders' Meeting. The Company shall use
reasonable best efforts to duly call, give notice of, convene and hold a meeting
of its stockholders (the "Company Stockholders' Meeting"), as promptly as
practicable after the SEC indicates that it has no further comments on the Proxy
Statement, and in any event shall hold the Company Stockholders' Meeting within
23 business days after the Proxy Statement is mailed to its stockholders, for
the purpose of voting upon the adoption of this Agreement. Subject to a Change
in Board Recommendation effected in accordance with Section 6.04(g), (i) the
Company shall include in the Proxy Statement the Company Board's recommendation
described in Section 3.19(a) that holders of Shares adopt this Agreement and the
Merger and (ii) the Company will use reasonable best efforts to solicit from its
stockholders proxies in favor of the adoption of this Agreement and the Merger
and will take all other action reasonably necessary or advisable to secure the
Stockholder Approval. The Company's obligations pursuant to the first sentence
of this Section 6.02 shall not be affected by the commencement, public proposal,
public disclosure or communication to the Company of an Acquisition Proposal or
a Change in Board Recommendation by the Company Board. For the avoidance of
doubt, the Company shall not be required to hold the Company Stockholders'
Meeting if this Agreement is validly terminated in accordance with Section 8.01.
Section 6.03 Access to Information; Confidentiality.
(a) Except as otherwise prohibited by applicable Law or as
would result in a waiver of any attorney-client privilege (it being understood
that the parties shall make appropriate substitute disclosure arrangements to
cause such
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information to be provided, if reasonably practicable, in a manner that is not
reasonably likely to result in such waiver), from the date of this Agreement
until the Effective Time, the Company shall (and shall cause the Company
Subsidiaries to): (i) provide to Parent and to the officers, directors,
employees, accountants, consultants, legal counsel, financing sources, agents
and other representatives (collectively, "Representatives") of Parent reasonable
access, during normal business hours and, upon reasonable prior notice by
Parent, to the officers, employees, agents, properties, offices and other
facilities of the Company and the Company Subsidiaries and use reasonable best
efforts to provide to Parent and its Representatives reasonable access, during
normal business hours and, upon reasonable prior notice by Parent, to the books
and records thereof; (ii) furnish to Parent within 25 days of the end of each
month following the date hereof, the standard monthly financial statements that
the Company prepares in the ordinary course of business; (iii) furnish promptly
to Parent such other information concerning the business, properties, contracts,
assets, Liabilities, personnel and other aspects of the Company and the Company
Subsidiaries as Parent or its Representatives may reasonably request; (iv)
cooperate with and assist Parent and its Representatives in the conduct of any
environmental assessments or sampling and (v) if the Closing has not occurred
prior to July 31, 2007, then the Company shall use commercially reasonable
efforts to deliver audited consolidated financial statements of the Company for
the fiscal year ended June 30, 2007 (the "2007 Audited Financial Statements") to
Parent no later than August 30, 2007 and if the Company does not deliver the
2007 Audited Financial Statements by August 30, 2007, then the Expiration Date
set forth in Section 8.01 shall be tolled by one calendar day for each calendar
day after August 30, 2007 until the Company delivers the 2007 Audited Financial
Statements to Parent.
(b) Nothing in this Section 6.03 shall require the Company to
permit any inspection, or to disclose any information, that in the reasonable
judgment of the Company would violate any of its respective obligations with
respect to confidentiality; provided, that the Company shall use its
commercially reasonable efforts to obtain the consent of such third party to
such inspection or disclosure.
(c) All information obtained by Parent or its Representatives
pursuant to this Section 6.03 shall be kept confidential in accordance with the
confidentiality agreement, dated March 7, 2007, between Veritas Capital Fund
Management, L.L.C. and the Company, the Confidentiality Agreement, dated March
29, 2007, between GS Direct, L.L.C. and the Company, the Confidentiality
Agreement, dated March 12, 2007, between Golden Gate Private Equity, Inc. and
the Company (together, the "Confidentiality Agreements").
Section 6.04 Acquisition Proposals.
(a) For purposes of this Agreement, "Acquisition Proposal"
means any proposal or offer (whether or not binding) from any Person or group
(other than Parent and its Affiliates) relating to any direct or indirect
acquisition or purchase of 15% or more of the assets of the Company and the
Company Subsidiaries, taken as a whole, or 15% or more of any class of equity
securities of the Company or Company Subsidiary then outstanding, any tender
offer or exchange offer that if consummated
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would result in any Person beneficially owning 15% or more of any class of
equity securities of the Company or any Company Subsidiary then outstanding, and
any merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving the Company, other than the
transactions contemplated by this Agreement.
(b) From the date of this Agreement until the Effective Time,
the Company shall, and shall cause the Company Subsidiaries and their respective
Representatives, to (i) immediately cease any discussions or negotiations with
any parties that may be ongoing with respect to an Acquisition Proposal and
request the prompt return or written acknowledgement of destruction of all
confidential information previously furnished to such parties (including the
parties to the Prior Agreement) or their representatives and (ii) not modify,
waive, amend or release any standstill, confidentiality or similar agreements
entered into prior to the date hereof or any confidentiality agreement entered
into by the Company or any of the Company Subsidiaries between the date hereof
and the Effective Time. Except as expressly permitted by Section 6.04(c), the
Company shall not, nor shall the Company permit any of the Company Subsidiaries
or their respective Representatives to, (A) solicit, initiate, facilitate or
knowingly encourage (including by way of furnishing non-public information or
providing access to its properties, books, records or personnel) any inquiries
regarding, or the making of any proposal or offer that constitutes, or could
reasonably be expected to lead to, an Acquisition Proposal, (B) have any
discussions (other than to state that the Company is not permitted to have
discussions) or participate in any negotiations regarding an Acquisition
Proposal, or execute or enter into any agreement, understanding or arrangement
with respect to an Acquisition Proposal, or approve or recommend or propose to
approve or recommend an Acquisition Proposal or any agreement, understanding or
arrangement relating to an Acquisition Proposal, (C) take any action to exempt
any Person from the restrictions on business combinations contained in Section
203, the Company's certificate of incorporation and bylaws or otherwise cause
such restrictions not to apply or (D) amend or exempt any Person from the Rights
Plan other than as contemplated by Section 6.15 (or resolve or authorize or
propose to agree to do any of the foregoing actions). Without limiting the
foregoing, it is agreed that any failure by any Representative of the Company or
any Company Subsidiary to comply with the foregoing restrictions, whether or not
such Person is purporting to act on behalf of the Company or any of the Company
Subsidiaries, or otherwise, will be deemed to be a breach of this Section
6.04(b) by the Company.
(c) Notwithstanding Section 6.04(b), if, prior to obtaining
the Stockholder Approval and following the receipt by the Company of a bona fide
written Acquisition Proposal from any Person, which Acquisition Proposal was
made after the date of this Agreement and did not result, directly or
indirectly, from a breach of this Section 6.04, the Company Board determines in
good faith, (i) after consultation with its financial advisors (including at
least one financial advisor who is not and whose Affiliates are not proposing to
provide debt or equity financing in connection with such Acquisition Proposal)
and, with respect to the matters covered by clause (iii) of the definition of
"Superior Proposal" set forth in Section 6.04(i), its outside legal counsel,
that such Acquisition Proposal constitutes or would reasonably be expected to
lead to a
- 42 -
Superior Proposal and (ii) after consultation with outside legal counsel, that
the failure to take the actions set forth in clauses (x) and (y) below with
respect to such Acquisition Proposal would be inconsistent with its fiduciary
duties under applicable Law, the Company may, in response to such Acquisition
Proposal, subject to compliance with this Section 6.04, and after giving notice
to Parent (x) furnish information with respect to the Company to the Person who
has made such Acquisition Proposal pursuant to an Acceptable Confidentiality
Agreement (provided that all such information has previously been provided to
Parent or is provided to Parent substantially concurrently with the time it is
provided to such Person) and (y) participate in discussions and negotiations
regarding such Acquisition Proposal. From and after the date of this Agreement,
the Company shall advise Parent orally and in writing of the receipt of any
Acquisition Proposal or any inquiry with respect to, or that could reasonably be
expected to lead to, any Acquisition Proposal (in each case within one business
day of receipt thereof), specifying the material terms and conditions thereof
and the identity of the party making such Acquisition Proposal or inquiry and
the Company shall provide to Parent (within such timeframe), a copy of all
written materials provided to the Company or any of the Company Subsidiaries in
connection with any such Acquisition Proposal or inquiry. The Company agrees
that it and the Company Subsidiaries will not enter into any confidentiality
agreement with any Person subsequent to the date hereof which prohibits the
Company from providing such information to Parent. From and after the date of
this Agreement, the Company shall notify Parent (within one business day) orally
and in writing of any material modifications to the financial or other material
terms of any Acquisition Proposal or inquiry and shall provide to Parent, within
such time frame, a copy of all written materials subsequently provided to or by
the Company or any Company Subsidiary in connection with any such Acquisition
Proposal or inquiry.
(d) Except as set forth in Section 6.04(e) and Section
6.04(g), neither the Company Board nor any committee thereof shall, directly or
indirectly, (i) withdraw or modify, or propose publicly to withdraw or modify,
or resolve to withdraw or modify, in a manner adverse to Parent, the approval or
recommendation by the Company Board of the Merger, this Agreement or the Other
Transactions; (ii) approve or recommend, or propose publicly to approve or
recommend, or resolve to approve or recommend, any Acquisition Proposal (any of
the actions referred to in the foregoing clauses (i) and (ii), whether taken by
the Company Board or any committee thereof a "Change in Board Recommendation");
(iii) approve or recommend or allow the Company or any of the Company
Subsidiaries to enter into any letter of intent, acquisition agreement or any
similar agreement or understanding (A) constituting or related to, or that is
intended to or could reasonably be expected to lead to, any Acquisition Proposal
or (B) requiring it to abandon, terminate or fail to consummate the Merger or
any Other Transaction contemplated by this Agreement; or (iv) effect any
transaction contemplated by any Acquisition Proposal.
(e) Notwithstanding Section 6.04(d), the Company Board may,
prior to obtaining the Stockholder Approval, in response to a Superior Proposal
received by the Company Board after the date of this Agreement, terminate this
Agreement to enter into an agreement with respect to such Superior Proposal, but
only if:
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(A) such Superior Proposal did not result, directly
or indirectly, from a breach by the Company of this Section 6.04;
(B) the Company Board shall have first provided prior
written notice to Parent that it is prepared to terminate this Agreement to
enter into an agreement with respect to a Superior Proposal from any Person,
which notice shall attach the most current version of any written agreement
relating to the transaction that constitutes such Superior Proposal, the
identity of the party making such Superior Proposal and any other material terms
and conditions thereof and shall cause the Company's Representatives to
negotiate in good faith with Parent so that Parent may propose an amendment to
this Agreement for the purpose of causing the Acquisition Proposal to no longer
constitute a Superior Proposal;
(C) Parent does not make, within three business days
after the receipt of such notice (it being understood and agreed that any change
to the financial or other material terms of such Superior Proposal shall require
an additional notice to Parent and a new three business day period), a binding,
written and complete (including any schedules or exhibits) proposal that the
Company Board determines in good faith, after consultation with its financial
advisors, causes the Acquisition Proposal that constituted a Superior Proposal
to no longer constitute a Superior Proposal; and
(D) the Company pays the Company Termination Fee
under Section 8.03(b) concurrently with and as a condition of such termination.
(f) The Company agrees that, during the period of three
business days prior to terminating this Agreement to enter into an agreement
with respect to a Superior Proposal (and any subsequent three business day
period pursuant to the parenthetical in clause (C) above), the Company shall
consider in good faith any revisions to the terms of the transaction
contemplated by this Agreement that are proposed by Parent.
(g) Notwithstanding Section 6.04(d), at any time prior to
obtaining the Stockholder Approval, if the Company Board has concluded in good
faith, following consultation with its outside legal counsel, that the failure
of the Company Board to make a Change in Board Recommendation would be
inconsistent with its fiduciary duties under applicable Law, then the Company
Board may make a Change in Board Recommendation.
(h) Nothing contained in this Section 6.04 shall prohibit the
Company from complying with Rules 14a-9, 14d-9 or 14e-2 promulgated under the
Exchange Act, or making any required disclosure to the Company's stockholders
if, in the good faith judgment of the Company Board, after consultation with its
outside legal counsel, the failure to do so would be inconsistent with its
fiduciary duties under applicable Law or is otherwise required under applicable
Law; provided, however, that, in any event, the Company Board shall not be
permitted to (i) make a Change in Board Recommendation or (ii) take any position
under Rule 14e-2(a) other than recommending
- 44 -
rejection of such tender or exchange offer, in each case, unless it has complied
with all of its obligations under this Section 6.04.
(i) For purposes of this Agreement, "Superior Proposal" means
any bona fide written Acquisition Proposal not solicited or initiated in
violation of this Section 6.04 that (i) relates to an acquisition by a Person or
group acting in concert of either (A) more than 50% of the equity interests of
the Company pursuant to a tender offer, merger or otherwise or (B) more than 50%
of the assets used in the conduct of the business of the Company and the Company
Subsidiaries, taken as a whole, (ii) the Company Board determines in its good
faith judgment (after consultation with its financial advisors (including at
least one financial advisor who is not and whose Affiliates are not proposing to
provide debt or equity financing in connection with such Acquisition Proposal))
would, if consummated, result in a transaction that is more favorable to the
Company's stockholders (in their capacities as stockholders) from a financial
point of view than the transactions contemplated by this Agreement (taking into
account any alterations to this Agreement agreed to by Parent or Merger Sub in
response thereto), (iii) the Company Board determines in good faith (after
consultation with its financial advisors (including at least one financial
advisor who is not and whose Affiliates are not proposing to provide debt or
equity financing in connection with such Acquisition Proposal) and its outside
legal counsel) is reasonably capable of being consummated and (iv) would not
result in the Person making such Acquisition Proposal and its Affiliates being
liable to the Company for a lower "termination fee," amount of liquidated
damages or other measure or amount of damages than those for which Parent and
its Affiliates could be liable hereunder, in each case, upon a failure to
consummate such transaction or obtain any requisite debt financing.
Section 6.05 Directors' and Officers' Indemnification and Insurance.
(a) For a period of six years after the Effective Time, unless
otherwise required by applicable Law, the certificate of incorporation and
bylaws (or equivalent organizational documents) of the Surviving Corporation and
the Company Subsidiaries shall contain provisions no less favorable with respect
to the indemnification and exculpation of directors and officers than are set
forth in the certificate of incorporation or bylaws (or equivalent
organizational documents) of the Company (or the relevant Company Subsidiary) as
in effect on the date hereof. From and after the Effective Time, Parent shall
cause the Surviving Corporation, to the fullest extent permitted under
applicable Law (including to the greatest extent authorized or permitted by any
amendments to or replacements of the DGCL adopted after the date of this
Agreement that increase the extent to which a corporation may indemnify its
officers and directors), to indemnify and hold harmless (and advance funds in
respect of each of the foregoing) each present and former director, officer or
employee of the Company and each Company Subsidiary (collectively, the
"Indemnified Parties"), in and to the extent of their capacities as such and not
as stockholders of the Company or any Company Subsidiary, against any costs or
expenses (including advancing attorneys' fees and expenses in advance of the
final disposition of any claim, suit, proceeding or investigation to each
Indemnified Party to the fullest extent permitted by Law), judgments, fines,
losses, claims, damages, liabilities and amounts paid in settlement (with
- 45 -
the consent of Parent, which consent shall not be unreasonably withheld) in
connection with any actual or threatened Action, arising out of, relating to or
in connection with any action or omission occurring or alleged to have occurred
before or at the Effective Time (including acts or omissions in connection with
such persons serving as an officer, director or other fiduciary in any entity if
such service was at the request or for the benefit of the Company), except for
in any case, any claim, judgments, fines, penalties and amounts to be paid which
relate to any act or omission which constitutes a material violation of Law or
resulted from or arose out of fraud, bad faith, gross negligence or willful
misconduct of an Indemnified Party. In the event of any such Action, the
Surviving Corporation shall cooperate with the Indemnified Party in the defense
of such Action. The Surviving Corporation shall have the right to assume control
of and the defense of, any Action to which this Section 6.05(a) shall apply. The
Surviving Corporation shall pay all reasonable expenses, including reasonable
attorneys' fees, that may be incurred by any Indemnified Party in enforcing the
indemnity and other obligations provided in this Section 6.05(a); provided, that
all advancement of expenses pursuant to the foregoing shall be subject to an
undertaking to repay such advances if it is ultimately determined that such
person is not entitled to indemnification from the Surviving Corporation.
(b) The Surviving Corporation shall either (i) cause to be
obtained from an insurance carrier with the same or better rating as the
Company's current insurance carriers prior to the Effective Time a fully prepaid
"tail" insurance policy with a claims period of at least six years from the
Effective Time with respect to directors' and officers' liability insurance in
amount and scope at least as favorable as the Company's existing policies for
claims arising from facts or events that occurred prior to the Effective Time or
(ii) maintain the existing directors' and officers' liability insurance policies
maintained by the Company (provided that the Surviving Corporation may
substitute therefor policies of at least the same coverage containing terms and
conditions that are not less favorable to the Indemnified Parties from an
insurance carrier with the same or better rating as the Company's current
insurance carriers) for a period of six years after the Effective Time so long
as the annual premium therefor is not in excess of 300% of the most recent
annual premium (the "Benchmark Premium") paid prior to the date hereof;
provided, however, that if the existing directors' and officers' liability
insurance policies expire, are terminated or cancelled during such six-year
period or require an annual premium in excess of 300% of the Benchmark Premium
paid by the Company for such insurance, the Surviving Corporation will obtain as
much coverage as can be obtained for the remainder of such period for a premium
not in excess of 300% (on an annualized basis) of such Benchmark Premium.
(c) If Parent or the Surviving Corporation or any of its
successors or assigns (i) shall consolidate with or merge into any other
corporation or entity and shall not be the continuing or surviving corporation
or entity of such consolidation or merger or shall cease to continue to exist
for any reason or (ii) shall transfer all or substantially all of its properties
and assets to any individual, corporation or other entity, then, and in each
such case, proper provisions shall be made so that the successors and assigns of
Parent or the Surviving Corporation and the transferee or
- 46 -
transferees of such properties and assets, as applicable, shall assume all of
the obligations set forth in this Section 6.05.
(d) Nothing in this Agreement is intended to, shall be
construed to or shall release, waive or impair any rights to directors' and
officers' insurance claims under any policy that is or has been in existence
with respect to the Company or any of the Company Subsidiaries or their
respective officers, directors and employees, it being understood and agreed
that the indemnification provided for in this Section 6.05 is not prior to or in
substitution for any such claims under any such policies.
Section 6.06 Employee Benefits Matters.
(a) Parent hereby agrees that, for a period of one year after
the Effective Time, it shall, or it shall cause the Surviving Corporation and
its subsidiaries to, provide, in the aggregate, employees of the Company and the
Company Subsidiaries as of the Effective Time (other than those employees
covered by a collective bargaining agreement), with salaries, employee benefits
and incentive compensation opportunities (other than equity-based compensation)
that are substantially comparable in the aggregate to those provided to such
employees immediately prior to the Effective Time. From and after the Effective
Time, Parent shall cause the Surviving Corporation and its subsidiaries to
comply with the terms of (including terms which provide for amendment or
termination) all contracts, agreements, arrangements, policies, plans and
commitments of the Company and the Company Subsidiaries, including any
applicable collective bargaining agreement, as in effect immediately prior to
the Effective Time that are applicable to any current or former employees or
directors of the Company or any Company Subsidiary. Nothing herein shall
obligate the Surviving Corporation to continue the Company's Supplemental
Executive Retirement Plan, dated December 21, 1994, as amended (or any
substantially equivalent plan), or any bonus programs offered as of the date
hereof to any of the senior executives of the Company (or any substantially
equivalent program) or otherwise renew agreements with executives of the Company
or any Company Subsidiary on similar terms.
(b) Employees of the Company and the Company Subsidiaries
shall receive credit for all purposes (including for purposes of eligibility to
participate, vesting, benefit accrual and eligibility to receive benefits, but
excluding benefit accruals under any defined benefit pension plan) under any
employee benefit plan, program or arrangement established or maintained by
Parent, the Surviving Corporation or any of their respective subsidiaries under
which each such employee may be eligible to participate on or after the
Effective Time to the same extent recognized by the Company or any of the
Company Subsidiaries under comparable Plans immediately prior to the Effective
Time; provided, however, that such crediting of service shall not operate to
duplicate any benefit or the funding of any such benefit. Such plan, program or
arrangement shall credit each such employee of the Company and the Company
Subsidiaries for service accrued or deemed accrued on or prior to the Effective
Time with the Company or any Company Subsidiary; provided, however, that such
crediting of service shall not operate to duplicate any benefit or the funding
of any such benefit.
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(c) With respect to the welfare benefit plans, programs and
arrangements maintained, sponsored or contributed to by Parent or the Surviving
Corporation ("Purchaser Welfare Benefit Plans") in which an active employee of
the Company and the Company Subsidiaries may become eligible to participate in
following the Effective Time, Parent shall (i) waive, or use reasonable best
efforts to cause its insurance carrier to waive, all limitations as to
preexisting and at-work conditions, if any, with respect to participation and
coverage requirements applicable to each such active employee under any
Purchaser Welfare Benefit Plan to the same extent waived under a comparable Plan
and (ii) use reasonable best efforts to cause any eligible expenses incurred by
any employee of the Company or the Company Subsidiaries and his or her covered
dependents under comparable Plans during the plan year in which such individuals
move to a comparable Purchaser Welfare Benefit Plan to be taken into account
under the Purchaser Welfare Benefit Plans for purposes of satisfying all
deductible, coinsurance and maximum out-of-pocket requirements applicable to
such employee and his or her dependents as if such amounts had been paid in
accordance with the Purchaser Welfare Benefit Plans, and (iii) waive, or use
reasonable best efforts to cause its insurance carrier to waive, any waiting
period limitation or evidence of insurability requirement that would otherwise
be applicable to an employee of the Company or the Company Subsidiaries and his
or her eligible dependents on or after the Effective Time during the plan year
in which such individuals move to a comparable Purchaser Welfare Benefit Plan.
(d) No later than five business days prior to the Closing
Date, the Company shall provide Parent with a list setting forth the number of
employees by facility who have experienced an "employment loss" under the WARN
Act, during the six-month period ending on the Closing Date; provided that this
shall not apply with respect to any facility at which sufficient employees have
not been employed at any time in such six-month period so as to be subject to
the WARN Act.
(e) Without limiting the generality of the foregoing, no
provision of this Agreement shall create any third party beneficiary rights in
any employee or former employee of the Company or any of the Subsidiaries
(including any beneficiary or dependent thereof) in respect of continued
employment by the Company or any of the Subsidiaries or otherwise. Except as
required under any applicable collective bargaining agreement, nothing herein
shall (i) guarantee employment for any period of time or preclude the ability of
Parent or the Surviving Corporation or its subsidiaries to terminate any
employee of the Company for any reason, (ii) require Parent or the Surviving
Corporation or any of their respective subsidiaries to continue any Plans,
employee benefit plans or arrangements or prevent the amendment, modification or
termination thereof after the Closing Date or (iii) amend any Plans, employee
benefit plans or arrangements.
Section 6.07 HSR Act Filing.
(a) Each of Parent and the Company shall (i) use reasonable
best efforts to make or cause to be made the filings required of such party to
this Agreement or any of its subsidiaries or Affiliates under the HSR Act with
respect to the transactions
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contemplated by this Agreement as promptly as practicable after the date of this
Agreement, (ii) comply at the earliest practicable date with any request under
the HSR Act for additional information, documents, or other materials received
by such party or any of its subsidiaries from the United States Federal Trade
Commission or the United States Department of Justice or any other Governmental
Authority in respect of such filings or such transactions, and (iii) cooperate
in good faith with the other party to this Agreement in connection with any such
filing (including, with respect to the party to this Agreement making a filing,
providing copies of all such documents to the non-filing party to this Agreement
and its advisors prior to filing and, if requested, to accept all reasonable
additions, deletions or changes suggested in connection therewith) and in
connection with resolving any investigation or other inquiry of any such agency
or other Governmental Authority under any Antitrust Laws with respect to any
such filing or any such transaction. The parties to this Agreement shall consult
in good faith with each other to determine whether any other filing, application
or notice must be made or approval must be obtained pursuant to any applicable
Law, and shall use reasonable best efforts to furnish to each other all
information required for, any such filing, application or notice to be made or
approval to be obtained pursuant to any applicable Law, in connection with the
Merger and the other transactions contemplated by this Agreement. Each party to
this Agreement shall promptly notify the other parties to this Agreement of any
communication with, and any proposed understanding, undertaking, or agreement
with, any Governmental Authority regarding any such filings or any such
transaction. None of the parties to this Agreement shall independently
participate in any meeting, or engage in any substantive conversation, with any
Governmental Authority in respect of any such filings, investigation, or other
inquiry without giving the other parties to this Agreement prior notice of such
meeting and, to the extent permitted by such Governmental Authority, the
opportunity to attend and/or participate. The parties to this Agreement will
consult and cooperate with one another in good faith, in connection with any
analyses, appearances, presentations, memoranda, briefs, arguments, opinions and
proposals made or submitted by or on behalf of any party to this Agreement in
connection with proceedings under or relating to the HSR Act or other Antitrust
Laws or any other applicable Law, if any.
(b) Each of Parent and the Company shall use reasonable best
efforts to resolve such objections, if any, as may be asserted by any
Governmental Authority with respect to the transactions contemplated by this
Agreement under the HSR Act, the Sherman Act, as amended, the Clayton Act, as
amended, the Federal Trade Commission Act, as amended, and any other United
States federal or state or foreign statues, rules, regulations, orders, decrees,
administrative or judicial doctrines or other Laws that are designed to
prohibit, restrict or regulate actions having the purpose or effect of
monopolization or restraint of trade (collectively, "Antitrust Laws"). Each of
Parent and the Company shall use reasonable best efforts to take such action as
may be required to cause the expiration of the notice periods under the HSR Act
or other Antitrust Laws with respect to such transactions as promptly as
possible after the execution of this Agreement.
(c) Notwithstanding anything to the contrary, none of Parent,
the Company or the Surviving Corporation (or any of their subsidiaries or
Affiliates) shall in
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any event be required to hold separate or otherwise agree to any restrictions
on, sell, divest or dispose of any assets or businesses, including any assets or
business to be acquired pursuant to this Agreement, in connection with obtaining
any approval under any Antitrust Laws that may be asserted by any U.S. federal,
state, local or foreign antitrust or competition Governmental Authority.
Section 6.08 Notification of Certain Matters. (a) Subject to applicable Laws and
the instructions of any Governmental Authority, each of the Company and Parent
shall keep the other reasonably apprised of the status of matters relating to
completion of the transactions contemplated hereby, including promptly
furnishing the other with copies of notices or other communications received by
Parent or the Company, as the case may be, or any of the Company Subsidiaries,
from any third Person and/or any Governmental Authority with respect to the
Merger and the other transactions contemplated by this Agreement. Between the
date hereof and the Effective Time, the Company shall give prompt notice to
Parent, and Parent shall give prompt notice to the Company, if the occurrence or
non-occurrence of any event, which is likely to result in the failure of a
condition set forth in ARTICLE VII; provided, however, that the delivery of any
notice pursuant to this Section 6.08 shall not limit or otherwise affect the
remedies or conditions available hereunder to any of the parties receiving such
notice.
(a) The Company shall keep Parent informed, on a current
basis, of any events, discussions, notices or changes with respect to any Tax
(other than ordinary course communications which could not reasonably be
expected to be material to the Company), criminal or regulatory investigation or
action involving the Company or any of the Company Subsidiaries, and shall
reasonably cooperate with Parent and Parent's Affiliates in an effort to avoid
or mitigate any cost or regulatory consequences to them that might arise from
such investigation or action (including by reviewing written submissions in
advance, attending meetings with authorities and coordinating and providing
assistance in meeting with regulators).
Section 6.09 Financing.
(a) Parent and Merger Sub shall not, without the prior written
consent (which consent shall not be unreasonably withheld, delayed or
conditioned) of the Company (approved by the Company Board), amend, modify or
supplement (including in the definitive documents) (i) any of the material
conditions or contingencies to funding contained in the Financing Commitments or
(ii) any other material provision of the Financing Commitments, in either case
to the extent such amendment, modification or supplement would reasonably be
expected to adversely affect or delay the ability of Parent or Merger Sub to
consummate the transactions contemplated hereby or the likelihood of
consummation of the transactions contemplated hereby. Parent shall use its
reasonable best efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary or advisable to (i) satisfy on a timely
basis all material terms, conditions, representations and warranties applicable
to Parent set forth in the Financing Commitments that are within its control;
(ii) maintain in effect the Financing Commitments, negotiate and enter into
definitive agreements with respect thereto on the terms and conditions
contemplated by the Financing Commitments or on other terms
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acceptable to Parent not less favorable to Parent and Merger Sub and not in
violation of this Section 6.09; (iii) consummate the Financing at the Closing;
and (iv) enforce its material rights under the Financing Commitments. Parent
will furnish correct and complete copies of all such definitive agreements
(excluding any fee letters or ancillary documents which, by their terms, are
confidential) to the Company promptly upon their execution. If any portion of
the Debt Financing becomes unavailable on the terms and conditions described
above, Parent shall use its reasonable best efforts to obtain alternative debt
financing (the "Alternative Financing") from alternative sources (on terms and
conditions that are no less favorable to Parent than the terms and conditions as
set forth in the Commitment Letter) in an amount sufficient to consummate the
transactions contemplated by this Agreement. The Parent and Merger Sub shall use
commercially reasonable efforts (which shall not include acceptance by Parent of
the exercise by Parent's financing sources of their market flex or require
Parent to borrow under the Bridge Loans (as defined in the Debt Commitment
Letters)) to consummate the Financing using the consolidated unaudited financial
statements of the Company for the nine months ended March 31, 2007; provided
that if the Company Stockholders' Meeting is not held prior to July 31, 2007,
then the Parent and Merger Sub shall have no obligation to consummate the
Financing using the consolidated unaudited financial statements of the Company
for the nine months ended March 31, 2007. Parent and Merger Sub shall keep the
Company promptly apprised of material developments relating to the Financing,
including any breach by any party or termination of the Financing Commitments or
any other document relating to the Financing.
(b) The Company agrees to, and shall cause the Company
Subsidiaries to, and shall use its reasonable best efforts to cause its and
their Representatives to, provide, such cooperation (including with respect to
timeliness) in connection with the arrangement of the Financing (which for
purposes of this Section 6.09 shall be deemed to include the Alternative
Financing) as may be reasonably requested by Parent, including at reasonable
times, locations and intervals (i) participation in a reasonable number of
meetings, drafting sessions, due diligence sessions and presentations to
prospective lenders and investors, (ii) furnishing, or using reasonable best
efforts to cause third parties to furnish, Parent and its financing sources with
financial and other pertinent business and other pertinent information,
documents and materials regarding the Company and its operating segments and
Company Subsidiaries as may be reasonably requested by Parent, including all
opinions and consents (including audit reports) with respect to the financial
statements of the Company and the Company Subsidiaries, all financial statements
and other financial information required to be included in a Registration
Statement on Form S-1 filed under the Securities Act (including such financial
statements and information meeting the requirements of Regulation S-X and
Regulation S-K under the Securities Act) and such financial statements and other
financial information of type and form customarily included in offering
documents used in connection with private placements under Rule 144A under the
Securities Act, in each case to consummate the offering of debt securities,
until such time as such financial statements, opinions and consents are no
longer required to be included in such filings by the Securities Act, the
Exchange Act or the rules and regulations promulgated, (iii) assisting Parent
and its financing sources in the preparation of (A) offering documents for any
of the Financing and (B) materials and financial and
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other information for rating agency presentations, (iv) cooperating with the
marketing efforts of Parent and its financing sources for any of the Financing
(including making its senior management available to participate in "road
shows"), (v) providing and executing documents as may be reasonably requested by
Parent, including customary legal opinions, 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 Debt
Financing or Alternative Financing, provided that no obligation of the Company
or any of the Company Subsidiaries under any agreement, document or pledge shall
be effective until the Effective Time, (vi) facilitating the pledging of
collateral (including entering into mortgages and leasehold mortgages and all
other documentation reasonably required for any real property related financing,
if reasonably requested) and removal of Liens, (vii) using reasonable best
efforts to obtain the assistance of its accountants to provide consents for the
use of their reports in materials related to the Debt Financing or Alternative
Financing and comfort letters, (viii) using reasonable best efforts to obtain
surveys, consents, environmental assessments and title insurance (including by
providing such affidavits and non-imputation endorsements in connection
therewith) as reasonably requested by Parent, (ix) providing reasonable and
customary management and legal representations to the Company's accountants and
(x) forming new Company Subsidiaries in the United Kingdom and taking such other
actions as Parent shall reasonably request in order to effectuate the
organizational structure set forth on Exhibit C hereto or any substantially
similar structure. Parent shall promptly upon request by the Company, reimburse
the Company for all reasonable and documented out-of-pocket costs incurred by
the Company or the Company Subsidiaries in connection with such cooperation.
Parent shall also indemnify and hold harmless the Company, the Company
Subsidiaries and its and their Representatives from and against any and all
losses, damages, claims, costs or expenses suffered or incurred by any of them
in connection with the arrangement of the Financing and any information utilized
in connection therewith (other than information provided by the Company or the
Company Subsidiaries), except to the extent that such losses, damages, claims,
costs or expenses, directly or indirectly, resulted from or arose out of the
willful misconduct of the Company or any of the Company Subsidiaries. Nothing in
this Section 6.09(b) shall require the Company or any Company Subsidiaries to
provide any assistance which would interfere unreasonably with the business or
operations of the Company or any Company Subsidiaries. Notwithstanding anything
to the contrary in this Agreement, the Company shall not be required to execute
and deliver any commitment letters, underwriting or placement agreements, pledge
and security documents, or other definitive financing documents in connection
with the Financing prior to Closing . Nothing herein shall obligate the Company
to provide any information that would violate any obligations of confidentiality
or result in a violation of Law or loss of privilege; provided, that the Company
shall make appropriate substitute arrangements to cause such information to be
provided, if reasonably practicable, in a manner that is not reasonably likely
to result in any such violations or loss of privilege.
Section 6.10 Further Action; Reasonable Best Efforts. Upon the terms
and subject to the conditions of this Agreement, each of the Company, Parent and
Merger Sub agrees to use its reasonable best efforts to effect the consummation
of the Merger as soon as reasonably practicable after the date hereof. Without
limiting the foregoing,
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(a) each of the Company, Parent and Merger Sub shall, subject to Section
6.07(c), use its reasonable best efforts to take, or cause to be taken, all
actions necessary to comply promptly with all legal requirements (and to cause
any injunction or order issued by a Governmental Authority to be removed) that
may be imposed on itself with respect to the Merger and shall promptly cooperate
with and furnish information to each other in connection with any such
requirements imposed upon any of them or any of their subsidiaries in connection
with the Merger, and (b) the Company shall, and shall cause the Company
Subsidiaries to, use its or their reasonable best efforts to provide notice or
obtain any consent, authorization, order or approval of, or any exemption by,
any Governmental Authority or other public or private third Person required to
be obtained or made by the Company or any of the Company Subsidiaries in
connection with the Merger or the taking of any action contemplated thereby or
by this Agreement (including obtaining consents identified by Parent or the
Company prior to the Closing under any Contracts of the Company or any Company
Subsidiary) and to deliver the certificates, documents or instruments required
by it to be delivered to Parent pursuant to Section 7.02 hereof.
Section 6.11 Public Announcements. The initial press releases issued by
each party announcing the Merger and the transactions contemplated by this
Agreement shall be in a form that is mutually acceptable to Parent and the
Company. Thereafter, Parent and the Company shall consult with each other before
issuing any press releases or otherwise making any public announcements with
respect to the transactions contemplated by this Agreement, and except as may be
required by applicable Laws or by the rules and regulations of the NASDAQ Global
Market shall not issue any such press release or make any such announcement
prior to such consultation (it being understood that the final form and content
of any such release or announcement, as well as the timing of any such release
or announcement, shall be at the final discretion of the disclosing party),
except that (a) Parent and the Company shall agree on the content of the first
announcement made to the Company's employees regarding the execution of this
Agreement and the transactions contemplated hereby and (b) the Company may, with
reasonable advance notice to Parent, otherwise communicate with the Company's
employees as it deems appropriate, provided that, such communications are not
inconsistent with the announcement agreed to in clause (a) and that in any
formal communications with such employees, the Company shall not make any
commitments to the employees that might reasonably be expected to be binding
upon Parent or the Surviving Corporation after the Closing; provided, however,
that the restrictions set forth in this Section 6.11 shall not apply to any
release or announcement made or proposed to be made by the Company pursuant to
and in accordance with Section 6.04(d), Section 6.04(g) or Section 6.04(h).
Section 6.12 Resignations. The Company shall use its reasonable best
efforts to obtain and deliver to Parent at the Closing evidence reasonably
satisfactory to Parent of the resignation, effective as of the Effective Time,
of those directors of the Company or any Company Subsidiary designated by Parent
to the Company in writing at least five business days prior to the Closing and
of the other Persons set forth in Section 6.12 of the Company Disclosure Letter.
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Section 6.13 Actions Regarding Anti-Takeover Statutes. If Section 203,
or the provisions in the Company's certificate of incorporation or bylaws
addressing interested stockholder transactions or business combinations, or any
other potentially applicable anti-takeover or similar statute or regulation is
or becomes applicable to the transactions contemplated by this Agreement, the
Company Board shall grant such approvals and take such other actions as may be
required so that the transactions contemplated hereby may be consummated as
promptly as practicable on the terms and conditions set forth in this Agreement.
Section 6.14 Standstill Provisions. The restrictions on Parent, Merger
Sub and their Affiliates contained in the standstill provisions of the
Confidentiality Agreements are hereby waived by the Company but only to the
extent reasonably necessary to permit Parent and Merger Sub to consummate the
transactions contemplated by this Agreement and/or to comply with their
obligations or exercise their legal rights and remedies under this Agreement.
For avoidance of doubt, such waiver does not permit the acquisition of shares of
Company Common Stock by Parent, Merger Sub, the Guarantors or any of their
Affiliates other than through the Merger, any revised proposal made by Parent
pursuant to Section 6.04(e)(C) or any Rollover Commitments.
Section 6.15 Rights Plan. The Company shall cause the Rights Plan to be
terminated upon the Effective Time, without payment or distribution of any
amounts or securities to any holders thereunder. Prior to the Effective Time,
the Company shall not terminate, waive any provision of, exempt any Person from
or amend the terms of the Rights Plan (or redeem the rights granted under the
Rights Plan).
Section 6.16 Solvency Opinion. In the event that Parent receives a
solvency opinion in connection with the Debt Financing, Parent agrees to cause
to be delivered to the Company a letter confirming that the Company Board may
rely on any such opinion from an appraisal firm that addresses whether,
following consummation of the transactions contemplated hereby, the Company and
the Company Subsidiaries would be solvent and that such transactions would not
otherwise "impair the capital of the corporation" within the meaning of Section
160(a) of the DGCL.
Section 6.17 Obligations of Merger Sub. Parent shall use reasonable
best efforts to cause Merger Sub and the Surviving Corporation to perform their
respective obligations under this Agreement and the Financing Commitments and to
consummate the transactions contemplated hereby and thereby upon the terms and
subject to the conditions set forth in this Agreement and in the Financing
Commitments.
ARTICLE VII
CONDITIONS TO THE MERGER
------------------------
Section 7.01 Conditions to the Obligations of Each Party. The
obligations of the Company, Parent and Merger Sub to consummate the Merger are
subject to the satisfaction or waiver as of the Closing of the following
conditions:
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(a) Company Stockholder Approval. The Stockholder Approval
shall have been obtained.
(b) Antitrust Approvals and Waiting Periods. Any waiting
period (and any extension thereof) applicable to the consummation of the Merger
and the transactions contemplated by this Agreement under applicable United
States antitrust Laws, including the HSR Act, and applicable foreign antitrust
or competition Laws, shall have expired or been terminated, and any approvals
required thereunder shall have been obtained.
(c) No Order. No Governmental Authority shall have enacted,
issued, promulgated, enforced or entered any injunction, order, decree or ruling
(whether temporary or preliminary) which is then in effect and has the effect of
making consummation of the Merger illegal or otherwise preventing or prohibiting
consummation of the Merger.
Section 7.02 Conditions to the Obligations of Parent and Merger Sub.
The obligations of Parent and Merger Sub to consummate the Merger are subject to
the satisfaction or waiver in writing (where permissible) as of the Closing of
the following additional conditions:
(a) Representations and Warranties.
(i) The representations and warranties set forth in
Section 3.03(d), the first sentence of Section 3.09, Section 3.19, Section 3.21,
Section 3.23 and Section 3.24 shall be true and correct in all respects as of
the Effective Time as though made on and as of such date (except to the extent
that any such representation and warranty expressly speaks as of an earlier
date, in which case such representation and warranty shall be true and correct
as of such earlier date);
(ii) The representations and warranties set forth in
Section 3.03(a) and Section 3.03(b) shall be true and correct in all material
respects as of the Effective Time as though made on and as of such date (except
to the extent that any such representation and warranty expressly speaks as of
an earlier date, in which case such representation and warranty shall be true
and correct in all material respects as of such earlier date); it being
understood that, in any event, the condition set forth in this Section
7.02(a)(ii) shall be deemed not to have been satisfied if any breach shall have
occurred that would reasonably be expected to result in an aggregate increase in
the Merger Consideration or consideration otherwise payable pursuant to any
repurchase or cancellation of any Company Stock Options or other equity
securities of the Company by more than $250,000 in the aggregate; and
(iii) The other representations and warranties of the
Company set forth in this Agreement shall be true and correct in all respects,
without regard to any "materiality" or "Company Material Adverse Effect"
qualifications contained in them, as of the Effective Time, as though made on
and as of such date and time (except for representations and warranties
expressly made as of a specified date, the
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accuracy of which shall be determined as of that specified date), unless the
failure or failures of all such representations and warranties to be so true and
correct in all respects would not, or would not reasonably be expected to,
individually or in the aggregate, have a Company Material Adverse Effect.
(b) Agreements and Covenants. The Company shall have performed
or complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by it on or prior to the
Effective Time.
(c) Officer's Certificate. The Company shall have delivered to
each of Parent and Merger Sub a certificate, dated the Closing Date, signed by
an officer on behalf of the Company and certifying as to the satisfaction of the
conditions specified in Section 7.02(a), Section 7.02(b) and Section 7.02(d).
(d) No Company Material Adverse Effect. Since the date of this
Agreement, there shall not have occurred any Company Material Adverse Effect or
event, circumstance, development, change or effect (whether arising out of facts
and circumstances addressed by the representations and warranties set forth in
this Agreement or otherwise) that would or would reasonably be expected to,
individually or in the aggregate, have a Company Material Adverse Effect.
(e) FIRPTA Affidavit. Prior to the Closing on the Closing
Date, the Company shall cause to be delivered to Parent an executed affidavit,
in accordance with Treasury Regulation Section 1.1445-2(c)(3) and in a form
satisfactory to Parent, certifying that the Company was not a "United States
real property holding corporation" (within the meaning of Section 897(c)(2) of
the Code) during any portion of the five-year period ending on the Closing Date
and sets forth the Company's name, address and taxpayer identification number.
(f) Dissenting Shares. The holders of not more than fifteen
percent (15%) of the Shares outstanding immediately prior to the Effective Time
that are entitled to appraisal of their Shares under Section 262 shall have made
and not withdrawn, demands for the appraisal of Shares under Section 262.
Section 7.03 Conditions to the Obligations of the Company. The
obligations of the Company to consummate the Merger are subject to the
satisfaction or waiver in writing (where permissible) as of the Closing of the
following additional conditions:
(a) Representations and Warranties. The representations and
warranties of each of Parent and Merger Sub set forth in this Agreement shall be
true and correct in all respects, without regard to any materiality or similar
qualifications contained in them, as of the Effective Time, as though made on
and as of such date and time (except for representations and warranties
expressly made as of a specified date, the accuracy of which shall be determined
as of that specified date), unless the failure or failures of all such
representations and warranties to be so true and correct in all respects
- 56 -
would not, individually or in the aggregate, prevent the consummation of the
Merger or prevent Parent or Merger Sub from performing its obligations under
this Agreement.
(b) Agreements and Covenants. Each of Parent and Merger Sub
shall have performed or complied in all material respects with all agreements
and covenants required by this Agreement to be performed or complied with by it
on or prior to the Effective Time.
(c) Officer's Certificate. Parent and Merger Sub shall have
delivered to the Company a certificate, dated the Closing Date, signed by an
officer on behalf of Parent and Merger Sub, certifying as to the satisfaction of
the conditions specified in Section 7.03(a) and Section 7.03(b).
ARTICLE VIII
TERMINATION
Section 8.01 Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time by action taken
or authorized by the board of directors of the terminating party or parties,
notwithstanding any requisite adoption of this Agreement by the stockholders of
the Company, and whether before or after the stockholders of the Company have
approved this Agreement at the Company Stockholders' Meeting (other than
termination by the Company pursuant to Section 8.01(h), which such termination
may only be effected prior to obtaining the Stockholder Approval, or a
termination by the Company or Parent pursuant to Section 8.01(f), which such
termination may, for the avoidance of doubt, only be effected after the Company
Stockholders' Meeting), as follows (the date of any such termination, the
"Termination Date"):
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if the Effective Time
shall not have occurred on or before October 2, 2007 (subject to extension as
provided in Section 6.03(a)(v), the "Expiration Date"); provided, however, that
the right to terminate this Agreement under this Section 8.01(b) shall not be
available to the party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Effective
Time to occur on or before such date;
(c) by either Parent or the Company if any Governmental
Authority shall have enacted, issued, promulgated, enforced or entered any
injunction, order, decree or ruling or taken any other action (including the
failure to have taken an action) which, in either such case, has become final
and non-appealable and has the effect of making consummation of the Merger
illegal or otherwise preventing or prohibiting consummation of the Merger;
(d) by Parent if (i) any of the representations and warranties
of the Company herein are or become untrue or inaccurate such that Section
7.02(a) would
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not be satisfied, or (ii) there has been a breach on the part of the Company of
any of its covenants or agreements herein such that Section 7.02(b) would not be
satisfied, and, in either such case, such breach has not been, or cannot be,
cured within 30 days after written notice to the Company;
(e) by the Company if (i) any of the representations and
warranties of either Parent or Merger Sub herein are or become untrue or
inaccurate such that Section 7.03(a) would not be satisfied, or (ii) there has
been a breach on the part of either Parent or Merger Sub of any of its covenants
or agreements herein such that Section 7.03(b) would not be satisfied, and, in
either such case, such breach has not been, or cannot be, cured within 30 days
after written notice to Parent and Merger Sub, as applicable;
(f) by either Parent or the Company if the Stockholder
Approval shall not have been obtained at the Company Stockholders' Meeting;
(g) by Parent if the Company Board shall have (i) effected a
Change in Board Recommendation or taken any of the actions prohibited by Section
6.04(d), (ii) taken a position contemplated by Rule 14e-2(a) of the Exchange Act
with respect to any Acquisition Proposal other than recommending rejection of
such Acquisition Proposal, or (iii) failed to include in the Proxy Statement
distributed to stockholders its recommendation that stockholders adopt and
approve this Agreement and the Merger; or
(h) by the Company pursuant to and in accordance with the
terms and conditions of Section 6.04(e).
Section 8.02 Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 8.01, this Agreement shall forthwith become
void, and there shall be no liability under this Agreement on the part of any
party hereto (except that the provisions of Section 6.03(c), this Section 8.02,
Section 8.03 and ARTICLE IX shall survive any such termination); provided,
however, that, subject to the limitations set forth in Section 9.10, nothing
herein shall relieve any party from liability for any intentional breach of any
of its representations, warranties, covenants or agreements set forth in this
Agreement prior to such termination.
Section 8.03 Fees and Expenses; Termination Fees.
(a) Except as otherwise set forth in this Section 8.03, all
Expenses incurred in connection with this Agreement shall be paid by the party
incurring such expenses, whether or not the Merger is consummated. "Expenses",
as used in this Agreement, shall include all reasonable out-of-pocket documented
expenses (including all fees and expenses of counsel, accountants, investment
bankers, financing sources, hedging counterparties, experts and consultants to a
party hereto and its Affiliates) incurred by a party, the Guarantors or on their
behalf (or, with respect to Parent and Merger Sub, incurred by their
stockholders or Affiliates or on their behalf) in connection with or related to
the transactions contemplated hereby, including the authorization,
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preparation, negotiation, execution and performance of this Agreement, the
Financing Commitments and the other transactions contemplated hereby or thereby
(including the Financing and the Alternative Financing), the preparation,
printing, filing and mailing of the Proxy Statement, the solicitation of
stockholder approval and all other matters related to the closing of the Merger.
For the avoidance of doubt, the Expenses of Parent and Merger Sub shall not
include any fees or expenses incurred prior to June 30, 2006.
(b) The Company agrees that if this Agreement shall be
terminated:
(i) by Parent or the Company pursuant to Section
8.01(f) or by Parent pursuant to Section 8.01(d), and at or prior to the
Termination Date, a Person or group shall have made an Acquisition Proposal to
the Company or the stockholders of the Company or an Acquisition Proposal shall
have otherwise become publicly announced and, no later than 12 months after the
applicable Termination Date, the Company enters into, or submits to the
stockholders of the Company for adoption, an agreement with respect to an
Acquisition Proposal, or the Acquisition Proposal (which, in each case, need not
be the same Acquisition Proposal as the Acquisition Proposal described above) is
consummated, then the Company will also pay to Parent, on the earlier of (x) the
date that a definitive agreement in respect of such Acquisition Proposal is
executed or submitted to stockholders for adoption and (y) the date of the
consummation of the transaction in respect of such Acquisition Proposal, the
Company Termination Fee in immediately available funds, as directed by Parent in
writing; provided, further that for the purpose of this Section 8.03(b)(i), all
references to "15%" in the definition of Acquisition Proposal shall be changed
to "50%"; or
(ii) by Parent pursuant to Section 8.01(g) or by the
Company pursuant to Section 8.01(h), then the Company shall pay to Parent, on
the Termination Date, the Company Termination Fee, in immediately available
funds, as directed by Parent in writing.
(c) The Company agrees that if this Agreement shall be
terminated, other than pursuant to Sections 8.01(c), 8.01(e) 8.01(c) or 8.01(e),
then the Company shall pay to Parent, on the Termination Date, in addition to
any amounts payable pursuant to Section 8.03(b), an amount equal to Parent's
Expenses, not to exceed $7,500,000, in immediately available funds, as directed
by Parent in writing.
(d) Parent agrees that if this Agreement shall be terminated
by the Company pursuant to Section 8.01(b) and at the time of such termination,
the conditions set forth in Section 7.01 and Section 7.02 (other than Section
7.02(c)) have been and remain satisfied but Parent shall have failed to
consummate the Merger due solely to a failure by Parent to obtain the Debt
Financing or the Alternative Financing, then Parent shall pay the Parent
Termination Fee in immediately available funds, as directed by the Company in
writing, and such payment shall be the Company's sole and exclusive remedy
against Parent, Merger Sub and the Guarantors and any of their respective
former, current and future direct or indirect equity holders, controlling
Persons, stockholders, directors, officers, employees, agents, Affiliates,
members,
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managers, general or limited partners or assignees (collectively, the "Parent
Parties"). Upon payment of the Parent Termination Fee, no Person shall have any
rights or claims against any of the Parent Parties under this Agreement, whether
at law or equity, in contract, in tort or otherwise, and none of the Parent
Parties shall have any further liability or obligation relating to or arising
out of this Agreement or the transactions contemplated by this Agreement.
(e) For purposes of this Agreement, "Company Termination Fee"
means an amount in cash equal to the sum of $30,000,000, "Parent Termination
Fee" means an amount in cash equal to $22,500,000. The Company and Parent
acknowledge that the agreements contained in this Section 8.03 are an integral
part of the transactions contemplated by this Agreement. In the event that the
Company shall fail to pay the Company Termination Fee when due, the Company
shall reimburse Parent for all reasonable costs and expenses actually incurred
or accrued by or on behalf of Parent (including reasonable fees and expenses of
counsel) in connection with the collection under and the enforcement of this
Section 8.03, together with interest from the Termination Date on all amounts so
owed at the prime rate announced by JPMorgan Chase Bank as its prime rate in
effect from time to time during such period, plus three percent (3%). The
parties hereto agree and understand that in no event shall (i) Parent be
required to pay the Parent Termination Fee on more than one occasion or (ii) the
Company be required to pay the Company Termination Fee on more than one
occasion.
ARTICLE IX
GENERAL PROVISIONS
------------------
Section 9.01 Non-Survival of Representations, Warranties and
Agreements. The representations and warranties in this Agreement and in any
certificate delivered pursuant hereto shall terminate at the Effective Time.
This Section 9.01 shall not limit any covenant or agreement of the parties which
by its terms contemplates performance after the Effective Time.
Section 9.02 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (a) on the date
of delivery if delivered personally, (b) on the first business day following the
date of dispatch if delivered by a nationally recognized next-day courier
service, (c) on the fifth business day following the date of mailing if
delivered by registered or certified mail (postage prepaid, return receipt
requested) or (d) if sent by facsimile or electronic transmission, when
transmitted and receipt is confirmed. All notices under Section 6.04 or ARTICLE
VIII shall be delivered by courier and facsimile or electronic transmission to
the respective parties at the addresses provided in accordance with this Section
9.02. All notices hereunder shall be delivered to the respective parties at the
following addresses (or at such other address for a party as shall be specified
in a notice given in accordance with this Section 9.02):
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(i) if to Parent or Merger Sub:
AX Holding Corp.
c/o Veritas Capital Fund Management, L.L.C.
590 Madison Avenue
New York, New York 10022
Attention: Robert B. McKeon
Facsimile No.: (212) 688-9411
E-mail: rmckeon@veritascapital.com
with a copy to:
Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
Attention: Benjamin M. Polk
Facsimile No.: (212) 593-5955
E-mail: benjamin.polk@srz.com
Golden Gate Private Equity, Inc.
One Embarcadero Center, 33rd Floor
San Francisco, California 94111
Attention: Prescott Ashe
John Knoll
Facsimile No.: (415) 627-1338
E-mail: pashe@goldengatecap.com
jknoll@goldengatecap.com
Kirkland & Ellis
555 California Street
San Francisco, California 94104
Attention: Jeffrey C. Hammes, P.C.
Stephen D. Oetgen
Facsimile No.: (415) 439-1500
E-mail: jhammes@kirkland.com
soetgen@kirkland.com
(ii) if to the Company:
Members of the Company Board
35 South Service Road
Plainview, New York 11803
Attention: Harvey R. Blau
Facsimile No.: (516) 938-6066
E-mail: stelz@griffoncorp.com
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with a copy to:
Aeroflex Incorporated
35 South Service Road
Plainview, New York 11803
Attention: John Adamovich, Jr., Secretary
Facsimile No.: (516) 694-0658
E-mail: john.adamovich@aeroflex.com
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10036-6522
Attention: Randall H. Doud, Esq.
Facsimile No.: (917) 777-2524
E-mail: rdoud@skadden.com
Section 9.03 Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective boards of directors
at any time prior to the Effective Time; provided, however, that, after the
adoption of this Agreement by the stockholders of the Company, no amendment
shall be made except as allowed under applicable Law. This Agreement may not be
amended except by an instrument in writing signed by each of the parties hereto.
Section 9.04 Waiver. Any party hereto may (a) extend the time for the
performance of any obligation or other act of any other party hereto, (b) waive
any inaccuracy in the representations and warranties of any other party
contained herein or in any document delivered pursuant hereto and (c) waive
compliance with any agreement of any other party or any condition to its own
obligations contained herein. Any such extension or waiver shall be valid only
if set forth in an instrument in writing signed by the party or parties to be
bound thereby. The failure of any party to assert any of its rights under this
Agreement or otherwise shall not constitute a waiver of those rights. Any waiver
pursuant to this Section 9.04 shall not be construed as a waiver of any
continuing or succeeding breach of such provision or a waiver or modification of
any other provision.
Section 9.05 Certain Definitions.
(a) For purposes of this Agreement:
"Active Subsidiary" means each Company Subsidiary that is not an
Inactive Subsidiary.
"Affiliate" of a specified Person means a Person who, directly or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, such specified Person.
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"beneficial owner", with respect to any Shares, has the meaning
ascribed to such term under Rule 13d-3(a) of the Exchange Act.
"business day" means any day on which the principal offices of the SEC
in Washington, D.C. are open to accept filings, or, in the case of determining a
date when any payment is due, any day on which banks are not required or
authorized to close in the City of New York.
"Company Material Adverse Effect" means any event, circumstance,
development, occurrence, change or effect that is or would reasonably be
expected to, individually or in the aggregate, (a) be materially adverse to the
business, assets, condition (financial or otherwise) or results of operations of
the Company and the Company Subsidiaries, taken as a whole or (b) materially
impair, prevent or delay the ability of the Company to consummate the Merger and
the other transactions to be performed or consummated by the Company pursuant to
this Agreement; provided that none of the following shall in and of itself
constitute, and no event, circumstance, development, occurrence, change or
effect to the extent resulting from any of the following shall constitute, a
Company Material Adverse Effect: (i) changes in the national or world economy or
financial markets as a whole, (ii) changes in general economic conditions taken
as a whole that affect the industries in which the Company and the Company
Subsidiaries conduct their business, (iii) general changes in the principal
industries in which the Company and the Company Subsidiaries operate, (iv) acts
of terrorism or war, including the engagement by the United States of America or
any other country in hostilities, and whether or not pursuant to the declaration
of a national emergency or war, or any earthquakes, hurricanes or other natural
disasters (v) the announcement of this Agreement and the transactions
contemplated hereby, (vi) any actions taken, or failure to take action, in each
case, to which Parent has expressly consented or requested in writing, (vii)
changes in GAAP (or the interpretation thereof), (viii) changes in the Company's
stock price or the trading volume of the Company's stock, in and of itself (it
being understood that the factors giving rise to or contributing to any change
in the Company's stock price or the trading volume of the Company's Stock that
are not otherwise excluded from the definition of a "Material Adverse Effect"
may be deemed to constitute, or be taken into account in determining whether
there has been or would reasonably be expected to be, a Material Adverse
Effect), (ix) any failure by the Company to meet any published analyst estimates
or expectations of the Company's revenue, earnings or other financial
performance or results of operations for any period, in and of itself, or any
failure by the Company to meet its internal budgets, plans or forecasts of its
revenues, earnings or other financial performance or results of operations, in
and of itself (it being understood that the facts or occurrences giving rise or
contributing to such failure that are not otherwise excluded from the definition
of a "Material Adverse Effect" may be deemed to constitute, or be taken into
account in determining whether there has been or would reasonably be expected to
be, a Material Adverse Effect, but only to the extent that, in the case of
clauses (i), (ii), (iii), (iv) and (vii), such events, circumstances,
developments, occurrences, changes, effects or conditions do not adversely
affect the Company or the Company Subsidiaries in a disproportionate manner
relative to other participants in the industries or markets in which they
operate; provided, further, that the exceptions set
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forth in clause (v) above shall not apply to references to "Company Material
Adverse Effect" in the representations and warranties set forth in Section 3.05
or, to the extent related to the representations and warranties set forth in
Section 3.05, the conditions set forth in Section 7.02(a)(iii) and Section
7.02(d).
"control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly, or as trustee or
executor, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, as
trustee or executor, by contract or credit arrangement or otherwise.
"Environmental Laws" means all foreign, federal, state, or local
statutes, common law, regulations, ordinances, codes, orders or decrees relating
to the protection of the environment, including the ambient air, soil, surface
water or groundwater, or relating to exposure to Materials of Environmental
Concern.
"Inactive Subsidiary" means each Company Subsidiary that is not engaged
in any business activity, does not conduct any operations, nor has or incurs any
liabilities, debts or other obligations of any nature (whether known or unknown,
absolute, accrued, contingent or otherwise).
"Indebtedness" means (i) indebtedness of the Company or any of the
Company Subsidiaries for borrowed money (including the aggregate principal
amount thereof, the aggregate amount of any accrued but unpaid interest thereon
and any prepayment penalties or other similar amounts payable in connection with
the repayment thereof on or prior to the Closing Date), (ii) obligations of the
Company or any of the Company Subsidiaries evidenced by bonds, notes,
debentures, letters of credit or similar instruments, (iii) obligations of the
Company or any of the Company Subsidiaries under capitalized leases, (iv)
obligations of the Company or any of the Company Subsidiaries under conditional
sale, title retention or similar agreements or arrangements creating an
obligation of the Company or any of the Company Subsidiaries with respect to the
deferred purchase price of property, (v) obligations in respect of interest rate
and currency obligation swaps, hedges or similar arrangements and (vi) all
obligations of any of the Company or any of the Company Subsidiaries to
guarantee any of the foregoing types of obligations on behalf of any Person
other than the Company or any of the Company Subsidiaries.
"knowledge of the Company" or "Company's knowledge" means the actual
knowledge after due inquiry of the Persons set forth in Section 9.05(a) of the
Company Disclosure Letter.
"Liens" means any pledges, claims, liens, mortgages, easements,
covenants, rights of way, title defects, encroachments and any other title
defects, charges, encumbrances, options to purchase or lease or otherwise
acquire any interest, conditional sales agreement, restriction (whether on
voting, sale, transfer, disposition or otherwise) and security interests of any
kind or nature whatsoever.
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"Materials of Environmental Concern" means any hazardous, acutely
hazardous, or toxic substance or waste defined or regulated as such under
Environmental Laws; petroleum, asbestos, lead, polychlorinated biphenyls, radon,
toxic mold, noise or radiation; and any other substance the exposure to which
would reasonably be expected, because of hazardous, harmful or toxic qualities,
to result in Liability under applicable Environmental Laws or the release of or
exposure to which is alleged to have resulted in bodily injury, personal injury
or property damage.
"Person" means an individual, corporation, partnership, limited
partnership, limited liability partnership, limited liability company,
syndicate, natural person (including a "person" as defined in Section 13(d)(3)
of the Exchange Act), trust, association or other entity or government,
political subdivision, agency or instrumentality of a government.
"Rollover Commitment" means any commitment entered into following the
date hereof by any Person to contribute equity of the Company to Parent pursuant
to an equity rollover agreement.
"subsidiary" or "subsidiaries" means, when used with respect to the
Company, the Surviving Corporation, Parent or Merger Sub, any other Person that
the Company, the Surviving Corporation, Parent or Merger Sub, as applicable,
directly or indirectly owns or has the power to vote or control 50% or more of
any class or series of capital stock or equity interests of such Person.
"Tax" or "Taxes" means any and all federal, state, local or foreign
taxes, charges, fees, levies, imposts, duties and governmental fees or other
like assessments or charges of any kind whatsoever, together with any interest
or penalty, addition to tax or additional amount imposed with respect thereto,
including, but not limited to, income, alternative or add-on minimum, gross
income, gross receipts, sales, use, value-added, ad valorem, franchise, capital,
paid-up capital, profits, lease, service, transfer, license, withholding,
estimated, payroll, employment, real and personal property, stamp, workers'
compensation, severance, and windfall profits tax.
"Tax Returns" means returns, forms, declarations, claims for refund, or
information returns or statements, reports and forms relating to Taxes filed or
required to be filed with any Governmental Authority (including any schedule or
attachment thereto) with respect to the Company or the Company Subsidiaries,
including any amendment thereof.
(b) When a reference is made in this Agreement to Sections,
Schedules or Exhibits, such reference shall be to a Section, Schedule or Exhibit
of this Agreement, respectively, unless otherwise indicated. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation". The words "hereof,"
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not any particular provision of
this Agreement. The definitions contained in this Agreement are applicable to
the singular as well as the plural
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forms of such terms. References to a Person are also to its permitted successors
and assigns. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms.
Section 9.06 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect 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 determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner in order that the transactions contemplated hereby be consummated as
originally contemplated to the fullest extent possible.
Section 9.07 Entire Agreement; Assignment. This Agreement, the
Guarantees, the Company Disclosure Letter and the Confidentiality Agreements
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof and thereof and supersede all prior agreements and
undertakings, both written and oral, among the parties hereto, or any of them,
with respect to the subject matter hereof and thereof. This Agreement shall not
be assigned (whether pursuant to a merger, by operation of law or otherwise),
except that Parent or Merger Sub may assign all or any of their rights and
obligations hereunder to an Affiliate, to a lender or financial institution as
collateral for indebtedness so long as assignment does not delay or impede the
consummation of the transactions contemplated hereby or, after the Closing, in
connection with a merger, consolidation or sale of all or substantially all of
the assets of Parent or the Surviving Corporation and its subsidiaries;
provided, however, that no such assignment shall relieve the assigning party of
its obligations hereunder if such assignee does not perform such obligations.
Section 9.08 No Third Party Beneficiaries. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto, and nothing
in this Agreement, express or implied, is intended to or shall confer upon any
other Person any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement, other than, subject to the limitations set forth in
Section 9.10, Section 6.05 (which is intended to be for the benefit of the
Persons covered thereby and may be enforced by such Persons).
Section 9.09 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware (without giving
effect to the choice of law principles therein).
Section 9.10 Sole and Exclusive Remedy; Specific Performance;
Submission to Jurisdiction; No Recourse.
(a) The Company agrees that to the extent it has incurred any
losses or damages in connection with this Agreement, (i) the maximum aggregate
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liability of Parent and Merger Sub (and the sole and exclusive remedy of the
Company) for such losses or damages shall be limited in the aggregate and
without duplication to either (but not both) (x) $22,500,000 or (y) the payment
of the Parent Termination Fee pursuant to Section 8.03(d), if applicable, in
each case, solely as and to the extent provided under the Guarantees, (ii) the
maximum liability of each of the Guarantors, directly or indirectly, shall be
several and not joint and shall be limited to the amount specified in their
respective Guarantees which constitutes the express obligations of the
Guarantors under their respective Guarantee, and (iii) in no event shall the
Company seek to recover any money damages in excess of such amount from any
Parent Party in connection therewith. The Guarantees shall, whether prior to or
following a termination of this Agreement, be the exclusive remedy of the
Company against any Parent Party for the loss suffered as a result of breach of
this Agreement by Parent or Merger Sub or the failure of the Merger to be
consummated, and the Company shall have no claim under the Equity Commitment
Letters which shall be solely for the benefit of Parent.
(b) The parties to this Agreement agree that irreparable
damage would occur in the event that any of the provisions of this Agreement are
not performed by the Company in accordance with their specific terms or are
otherwise breached. It is accordingly agreed that Parent and Merger Sub shall be
entitled to an injunction or injunctions or other equitable relief to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
of this Agreement in the Court of Chancery or other courts of the State of
Delaware, this being in addition to any other remedy to which Parent and Merger
Sub are entitled at law or in equity. The Company acknowledges and agrees that
it shall not be entitled to enforce specifically the terms and provisions of
this Agreement or seek any other equitable remedy and that the sole remedy of
the Company shall be, if applicable, the payment of the amounts provided for,
and subject to the limitations set forth in, Section 9.10(a).
(c) Each of the parties hereto (i) consents to submit itself
to the personal jurisdiction of the Court of Chancery or other courts of the
State of Delaware in the event any dispute arises out of this Agreement or any
of the transactions contemplated by this Agreement, (ii) agrees that it will not
attempt to deny or defeat such personal jurisdiction by motion or other request
for leave from such court, (iii) agrees that it will not bring any action
relating to this Agreement or any of the transactions contemplated by this
Agreement in any court other than the Court of Chancery or other courts of the
State of Delaware and (iv) to the fullest extent permitted by Law, consents to
service being made through the notice procedures set forth in Section 9.02. Each
party hereto hereby agrees that, to the fullest extent permitted by Law, service
of any process, summons, notice or document by U.S. registered mail to the
respective addresses set forth in Section 9.02 shall be effective service of
process for any suit or proceeding in connection with this Agreement or the
transactions contemplated hereby.
(d) This Agreement may only be enforced against, and any
claims or causes of action that may be based upon, arise out of or relate to
this Agreement, or the negotiation, execution or performance of this Agreement
may only be made against the entities that are expressly identified as parties
hereto and no past, present or future Affiliate, director, officer, employee,
incorporator, member, manager,
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partner, stockholder, agent, attorney or representative of any party hereto
shall have any liability for any obligations or liabilities of the parties to
this Agreement or for any claim based on, in respect of, or by reason of, the
transactions contemplated hereby.
Section 9.11 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE MERGER. EACH OF THE
PARTIES HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THAT FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE MERGER, AS APPLICABLE, BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11.
Section 9.12 Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
Section 9.13 Counterparts. This Agreement may be executed and delivered
(including by facsimile or other electronic transmission) in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SIGNATURE PAGE FOLLOWS
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IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
AX HOLDING CORP.
By: /s/ Robert B. McKeon
-----------------------------------
Name: Robert B. McKeon
Title President
AX ACQUISITION CORP.
By: /s/ Robert B. McKeon
-----------------------------------
Name: Robert B. McKeon
Title President
AEROFLEX INCORPORATED
By: /s/ John Adamovich, Jr.
-----------------------------------
Name: John Adamovich, Jr.
Title Senior Vice President
and Chief Financial
Officer