AGREEMENT AND PLAN OF MERGER

 

TABLE OF CONTENTS

Page

 

Index of Defined Terms		Index - iv

 

ARTICLE I
THE MERGER
Section 1.1		The Merger		1
Section 1.2		Effective Time		2
Section 1.3		Closing		2
Section 1.4		Directors and Officers of the Surviving Corporation		2
Section 1.5		Subsequent Actions		2
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1		Conversion of Capital Stock		3
Section 2.2		Paying Agent		3
Section 2.3		Company Equity Plans		4
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1		Organization		6
Section 3.2		Subsidiaries and Affiliates		7
Section 3.3		Capitalization		8
Section 3.4		Authorization; Validity of Agreement; Company Action		9
Section 3.5		Board Approvals		9
Section 3.6		Required Vote		10
Section 3.7		Consents and Approvals; No Violations		10
Section 3.8		Company SEC Documents and Financial Statements		10
Section 3.9		Absence of Certain Changes		12
Section 3.10		No Undisclosed Liabilities		12
Section 3.11		Litigation; Orders		13
Section 3.12		Employee Benefit Plans; ERISA		13
Section 3.13		Taxes		16
Section 3.14		Material Contracts.		18
Section 3.15		Real and Personal Property		19
Section 3.16		Intellectual Property		20
Section 3.17		Labor Matters		21
Section 3.18		Compliance with Laws		22
Section 3.19		Condition of Assets		23
Section 3.20		Customers and Suppliers		23

 

 

 

								Page
Section 3.21		Environmental Matters					23
Section 3.22		Insurance					25
Section 3.23		Certain Business Practices					25
Section 3.24		Proxy Statement; Information Provided					26
Section 3.25		Opinion of Financial Advisor					26
Section 3.26		Brokers					26
Section 3.27		State Takeover Statutes					26
Section 3.28		Rights Agreement					26
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
Section 4.1		Organization					27
Section 4.2		Authorization; Validity of Agreement; Necessary Action					27
Section 4.3		Consents and Approvals; No Violations					27
Section 4.4		Information in the Proxy Statement					28
Section 4.5		Brokers					28
Section 4.6		Financing					28
Section 4.7		No Share Ownership					28
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
Section 5.1		Interim Operations of the Company					29
Section 5.2		No Solicitation					31
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1		Company Shareholder Meeting; Proxy Statement					34
Section 6.2		Notification of Certain Matters					35
Section 6.3		Access; Confidentiality					35
Section 6.4		Publicity					36
Section 6.5		Insurance and Indemnification					36
Section 6.6		Third Party Standstill Agreements					37
Section 6.7		Further Action; Standard of Efforts					37
Section 6.8		State Takeover Laws					38
Section 6.9		Shareholder Litigation					38
Section 6.10		Company Notes					38
Section 6.11		Financial Information and Cooperation					40
Section 6.12		Employee Benefit Matters					41

 

ii

 

 

 

								Page
ARTICLE VII
CONDITIONS
Section 7.1		Conditions to Each Party’s Obligations to Effect the Merger					42
Section 7.2		Additional Conditions to Obligation of Parent and Merger Sub to Effect the Merger					42
Section 7.3		Additional Conditions to Obligation of the Company to Effect the Merger					43
ARTICLE VIII
TERMINATION
Section 8.1		Termination					44
Section 8.2		Notice of Termination; Effect of Termination					45
ARTICLE IX
MISCELLANEOUS
Section 9.1		Amendment and Modification					46
Section 9.2		Non-survival of Representations and Warranties					47
Section 9.3		Expenses					47
Section 9.4		Certain Definitions					47
Section 9.5		Notices					48
Section 9.6		Interpretation					50
Section 9.7		Jurisdiction					50
Section 9.8		Specific Performance					50
Section 9.9		Counterparts					50
Section 9.10		Entire Agreement; No Third-Party Beneficiaries					50
Section 9.11		Severability					51
Section 9.12		Governing Law					51
Section 9.13		Assignment					51

 

iii

 

 

Index of Defined Terms

Defined Term		Page
2003 Indenture		40
2008 Notes		39
2012 Notes		39
Acquisition Agreement		33
Acquisition Proposal		47
Adverse Recommendation Change		32
Agreement		1
Benefit Plans		14
Business Day		47
CERCLIS		24
Certificates		4
Cleanup		24
Closing		2
Closing Date		2
COBRA		15
Code		47
Company		1
Company Board of Directors		1
Company Board Recommendation		10
Company Disclosure Schedule		6
Company Employees		41
Company Financial Advisor		26
Company Material Adverse Change		7
Company Material Adverse Effect		7
Company SEC Documents		11
Company Shareholder Approval		9
Company Shareholder Meeting		34
Company Subsidiary		7
Confidentiality Agreement		33
Consent Condition		39
Contract		10
D&O Insurance		37
Debt Offer Documents		39
Debt Offers		39
Effective Time		2
Encumbrances		7
End Date		45
Environmental Claim		25
Environmental Laws		25
ERISA		13
ERISA Affiliate		14
Exchange Act		47

 

iv

 

 

 

Financial Statements		11
Financing		28
GAAP		11
Governmental Entity		10
Hazardous Substances		25
HSR Act		10
Indemnified Party		36
Indemnifying Parties		37
Indentures		40
Intellectual Property		48
International Benefit Plans		16
knowledge		48
Law		48
Leased Real Property		20
Material Contracts		19
Material Licenses		21
Maximum Amount		37
Merger		1
Merger Consideration		3
Merger Sub		1
Merger Sub Common Stock		3
Multiemployer Pension Plans		13
Notes		39
NPL		24
Option		5
Option Plans		5
Owned Real Property		20
Parent		1
Parent Benefit Plan		42
Parent Material Adverse Effect		28
Paying Agent		3
PBCL		1
Pension Plans		13
Permitted Encumbrances		48
Person		7
Proxy Statement		35
Real Property Lease		20
Representatives		32
Restricted Stock		5
Rights		3
Rights Agreement		3
SEC		48
Shares		1
Subsidiary		7
Superior Proposal		33
Surviving Corporation		1

 

v

 

 

 

Tax		48
Tax Return		49
Taxing Authority		48
Termination Fee		46
Voting Debt		8

 

vi

 

 

AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER (hereinafter referred to as this “ Agreement ”), dated October 15, 2006, by and among Oshkosh Truck Corporation, a Wisconsin corporation (“ Parent ”), Steel Acquisition Corp., a Pennsylvania corporation and a wholly-owned subsidiary of Parent (“ Merger Sub ”), and JLG Industries, Inc., a Pennsylvania corporation (the “ Company ”).

WHEREAS, the Board of Directors of each of Parent, Merger Sub and the Company has approved the acquisition of the Company by Parent by means of the merger of Merger Sub with and into the Company upon the terms and subject to the conditions set forth herein;

WHEREAS, also in furtherance of such acquisition, the Board of Directors of Merger Sub and the Company have approved this Agreement and the Merger (as defined in Section 1.1 ) in accordance with the Pennsylvania Business Corporation Law (the “ PBCL ”) and upon the terms and subject to the conditions set forth herein; and

WHEREAS, the Board of Directors of the Company (the “ Company Board of Directors ”) has unanimously determined that the Merger Consideration (as defined in Section 2.1(c) ) to be received by holders of shares of common stock, par value $0.20 per share, of the Company (together with the associated Rights (as hereinafter defined)) (the “ Shares ”) is fair to the holders of such Shares from a financial point of view and has resolved to recommend that the holders of Shares adopt this Agreement and the Merger, upon the terms and subject to the conditions set forth herein.

NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements set forth herein, the parties hereto agree as follows:

ARTICLE I

THE MERGER

Section 1.1         The Merger . (a)  Subject to the terms and conditions of this Agreement, at the Effective Time, the Company and Merger Sub shall consummate a merger (the “ Merger ”) pursuant to which (i) Merger Sub shall be merged with and into the Company and the separate corporate existence of Merger Sub shall thereupon cease, (ii) the Company shall be the successor or surviving corporation in the Merger and shall continue to be governed by the Laws of the Commonwealth of Pennsylvania, and (iii) the separate corporate existence of the Company with all its rights, privileges, immunities, powers and franchises shall continue unaffected by the Merger.  The corporation surviving the Merger is sometimes hereinafter referred to as the “ Surviving Corporation .”  The Merger shall have the effects set forth in the PBCL.

(b)        The Articles of Incorporation of the Company, as in effect immediately prior to the Effective Time, shall be the Articles of Incorporation of the Surviving Corporation, until thereafter amended as provided by Law and such Articles of Incorporation.

1

 

 

(c)        The Bylaws of Merger Sub, as in effect immediately prior to the Effective Time, shall be the Bylaws of the Surviving Corporation, except as to the name of the Surviving Corporation, which shall be JLG Industries, Inc., until thereafter amended as provided by Law, the Articles of Incorporation of the Surviving Corporation and such Bylaws.

Section 1.2         Effective Time .  Subject to the provisions of this Agreement, as soon as practicable on the Closing Date (as defined in Section 1.3 ), the parties shall (i) file the appropriate Articles of Merger in such form as is required by and executed in accordance with the relevant provisions of the PBCL and (ii) make all other filings or recordings required under the PBCL.  The Merger will become effective at such time as the Articles of Merger are duly filed with the Department of State of the Commonwealth of Pennsylvania, or at such subsequent date or time as the Company and Merger Sub agree and specify in the Articles of Merger (such time hereinafter referred to as the “ Effective Time ”).

Section 1.3         Closing .  The closing of the Merger (the “ Closing ”) will take place at 10:00 a.m., Chicago time, on the second Business Day after satisfaction or (to the extent permitted by applicable Law) waiver of all of the conditions set forth in Article VII (other than any such conditions which by their nature cannot be satisfied until the date of the Closing, which conditions shall be required to be so satisfied or (to the extent permitted by applicable Law) waived on the date of the Closing), provided that if pursuant to the immediately preceding clause the Closing would occur prior to December 6, 2006, Parent shall be entitled to elect to defer the Closing until December 6, 2006 (in any case, the “ Closing Date ”), at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 333 West Wacker Drive, Chicago, Illinois 60606, unless another date or place is agreed to in writing by the parties hereto.

Section 1.4         Directors and Officers of the Surviving Corporation .  The directors of the Merger Sub immediately prior to the Effective Time shall, from and after the Effective Time, be the directors of the Surviving Corporation, and the officers of the Company immediately prior to the Effective Time shall, from and after the Effective Time, be the officers of the Surviving Corporation, in each case until their respective successors shall have been duly elected, designated or qualified, or until their earlier death, resignation or removal in accordance with the Surviving Corporation’s Articles of Incorporation and Bylaws.

Section 1.5         Subsequent Actions .  If at any time after the Effective Time the Surviving Corporation shall determine, in its sole discretion, that any actions are necessary or desirable to vest, perfect or confirm of record or otherwise in the Surviving Corporation its right, title or interest in, to or under any of the rights, properties or assets of either of the Company or Merger Sub acquired or to be acquired by the Surviving Corporation as a result of, or in connection with, the Merger or otherwise to carry out this Agreement, then the officers and directors of the Surviving Corporation shall be authorized to take all such actions as may be necessary or desirable to vest all right, title or interest in, to and under such rights, properties or assets in the Surviving Corporation or otherwise to carry out this Agreement.

2

 

 

Article ii

CONVERSION OF SECURITIES

Section 2.1         Conversion of Capital Stock .  As of the Effective Time, by virtue of the Merger and without any action on the part of the holders of any Shares or the holders of the common stock, par value $0.01 per share, of Merger Sub (the “ Merger Sub Common Stock ”):

(a)        Each outstanding share of Merger Sub Common Stock shall be converted into and become one fully paid and nonassessable share of common stock of the Surviving Corporation.

(b)        All Shares that are owned by the Company as treasury stock and any Shares owned by Parent, Merger Sub or any other wholly-owned Subsidiary of Parent shall be cancelled and retired, and no consideration shall be delivered in exchange therefor.

(c)        Each outstanding Share, including the associated rights (the “ Rights ”), issued pursuant to the Rights Agreement, dated as of May 24, 2000, by and between the Company and American Stock Transfer and Trust Company (the “ Rights Agreement ”) (other than Shares to be cancelled in accordance with Section 2.1(b) ) shall be converted into the right to receive $28.00, payable to the holder thereof in cash, without interest (the “ Merger Consideration ”), subject to any required withholding of Taxes.  Any amounts withheld in respect of Taxes and paid to the appropriate Taxing Authorities shall be treated for all purposes of this Agreement as having been paid to the holder of Shares in respect of which such withholding was made.  From and after the Effective Time, all such Shares shall no longer be outstanding and shall automatically be cancelled and retired, and each holder of a certificate representing any such Shares shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration therefor upon the surrender of such certificate in accordance with Section 2.2 , without interest thereon.

Section 2.2         Paying Agent .  (a)  Prior to the Effective Time, Parent shall designate a bank or trust company reasonably acceptable to the Company as an agent (the “ Paying Agent ”) for the holders of Shares in connection with the Merger and to receive the funds to which holders of Shares shall become entitled pursuant to Section 2.1(c) .  Prior to the Effective Time, Parent or Merger Sub shall deposit with the Paying Agent the aggregate Merger Consideration.  Such funds shall be invested by the Paying Agent as directed by Parent or the Surviving Corporation, in its sole discretion, pending payment thereof by the Paying Agent to the holders of Shares.  Earnings from such investments shall be the sole and exclusive property of Parent and the Surviving Corporation, and no part of such earnings shall accrue to the benefit of holders of Shares.

(b)        Promptly after the Effective Time, and in any event within five Business Days thereafter, the Paying Agent shall mail to each person who was, at the Effective Time, a holder of record of Shares whose Shares were converted pursuant to Section 2.1 into the right to receive the Merger Consideration (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the certificates evidencing such Shares (the “ Certificates ”) shall pass, only upon proper delivery of the Certificates to the Paying Agent) and

3

 

 

(ii) instructions for use in effecting the surrender of the Certificates in exchange for payment of the Merger Consideration.  Upon surrender of a Certificate for cancellation to the Paying Agent or to such other agent or agents as may be appointed by Parent, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documentation as may be required pursuant to such instructions, the holder of such Certificate shall be entitled to receive in exchange therefor the Merger Consideration for each Share formerly represented by such Certificate and the Certificate so surrendered shall forthwith be cancelled.  If payment of the Merger Consideration is to be made to a Person other than the Person in whose name the surrendered Certificate is registered, (x) it shall be a condition precedent of payment that the Certificate so surrendered shall be properly endorsed or shall be otherwise in proper form for transfer, and (y) the Person requesting such payment shall have paid any transfer and other taxes required by reason of the payment of the Merger Consideration to a Person other than the registered holder of the Certificate surrendered or shall have established to the satisfaction of the Surviving Corporation that such tax either has been paid or is not required to be paid.  Until surrendered as contemplated by this Section 2.2 , each Certificate shall be deemed after the Effective Time to represent only the right to receive the Merger Consideration, without interest thereon.

(c)        At the Effective Time, the stock transfer books of the Company shall be closed and thereafter there shall be no further registration of transfers of Shares on the records of the Company.  From and after the Effective Time, the holders of Certificates evidencing ownership of Shares outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such Shares, except as otherwise provided for herein or by applicable Law.  If, after the Effective Time, Certificates are presented to the Surviving Corporation for any reason, they shall be cancelled and exchanged as provided in this Article II .

(d)        At any time following six months after the Effective Time, the Surviving Corporation shall be entitled to require the Paying Agent to deliver to it any funds (including any interest received with respect thereto) made available to the Paying Agent and not disbursed to holders of Shares, and thereafter such holders shall be entitled to look only to the Surviving Corporation (subject to abandoned property, escheat or other similar Laws) only as general creditors thereof with respect to the Merger Consideration payable upon due surrender of their Certificates, without any interest thereon.  Notwithstanding the foregoing, neither the Surviving Corporation nor the Paying Agent shall be liable to any holder of a Share for Merger Consideration delivered to a public official pursuant to any applicable abandoned property, escheat or other similar Law.

(e)        If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by Parent, the posting by such Person of a bond in such reasonable amount as Parent may direct as indemnity against any claim that may be made against it with respect to such Certificate, the Paying Agent shall issue in exchange for such lost, stolen or destroyed Certificate the applicable Merger Consideration with respect thereto pursuant to this Agreement.

4

 

 

Section 2.3             Company Equity Plans . (a) Effective as of the Effective Time, the Company shall (i) terminate the Company’s 2005 Long Term Incentive Plan, 2003 Long Term Incentive Plan, Amended and Restated Stock Incentive Plan and Director’s Stock Incentive Plan and any predecessor plans thereto, each as amended through the date of this Agreement (collectively, the “ Option Plans ”), and (ii) cancel, at the Effective Time, each outstanding option to purchase shares of common stock of the Company granted under the Option Plans or otherwise (each, an “ Option ”) that is outstanding and unexercised as of such date.  Each holder of an Option that is outstanding and unexercised at the Effective Time whether or not vested pursuant to the terms of the applicable Option Plan shall be entitled to receive from the Surviving Corporation immediately after the Effective Time, in exchange for the cancellation of such Option, an amount in cash equal to the excess, if any, of (x) the Merger Consideration over (y) the per share exercise price of such Option, multiplied by the number of Shares subject to such Option as of the Effective Time.  Any such payments shall be subject to all applicable Tax withholding requirements.

(b)        The Surviving Corporation shall be entitled to deduct and withhold from the amounts otherwise payable pursuant to Section 2.3(a) to any holder of Options such amounts as the Surviving Corporation is required to deduct and withhold with respect to the making of such payment under the Code or any provision of state, local or foreign tax Law.  To the extent that amounts are so deducted and withheld by the Surviving Corporation and paid to the appropriate Taxing Authorities, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Options in respect of which such deduction and withholding was made by Merger Sub.

(c)        As soon as practicable following the date of this Agreement, the Company Board of Directors (or, if appropriate, any committee or subcommittee thereof administering the Option Plans) shall adopt such resolutions or take such other actions as may be required to provide for the lapse as of the Effective Time of all forfeiture provisions applicable to any shares of Restricted Stock.  Each holder of Restricted Stock shall be treated as a holder of the corresponding number of Shares as of the Effective Time in accordance with the terms of Section 2.2 in the same manner as other Shares issued and outstanding as of immediately prior to the Effective Time; provided , that in the event that the terms of any Option Plan prohibit the payment of the Merger Consideration immediately after the Effective Time, such payment shall be made as soon as permitted pursuant to the terms of such Option Plan.  As used in this Agreement, “ Restricted Stock ” means any outstanding award of restricted Company common stock with respect to which the restrictions have not lapsed, and which award shall not have previously expired or terminated, to a current or former employee, director or independent contractor of the Company or any of the Company Subsidiaries or any predecessor thereof pursuant to any applicable Option Plan or any other contract or agreement entered into by the Company or any of the Company Subsidiaries.

(d)        As soon as practicable following the date of this Agreement, the Company Board of Directors (or, if appropriate, any committee or subcommittee thereof administering the Option Plans) shall adopt such resolutions or take such other actions as may be required to provide for (i) the lapse as of the Effective Time of all forfeiture provisions applicable to any Performance Shares or Performance Units and (ii) the performance target(s) under the Performance Units or Performance Shares to be deemed satisfied in full.  Each Performance Share or Performance Unit shall terminate and be canceled at the Effective Time. 

5

 

 

Each holder of a Performance Share or Performance Unit award who has remained continuously employed with the Company through the Effective Time shall be entitled to receive from the Company, as soon as practicable following the Effective Time, in settlement of such award, Merger Consideration for each Share that the holder of each award would have received under the award as of the Effective Time in accordance with this Section 2.3(d) ; provided , that in the event that the terms of any Option Plan prohibit the payment of the Merger Consideration immediately after the Effective Time, such payment shall be made as soon as permitted pursuant to the terms of such Option Plan.

(e)        As of the Effective Time, except as provided in this Section 2.3 , all rights under any Option and any provision of the Option Plans providing for the issuance or grant of any other interest in respect of the capital stock of the Company shall be canceled.

(f)         Prior to the Effective Time, the Company shall take all necessary action (i) (in accordance with that certain SEC no-action letter, dated January 12, 1999, to Skadden, Arps, Slate, Meagher & Flom LLP) to provide that the treatment of Options pursuant to Section 2.3(a) will qualify for exemption under Rule 16b-3(d) or (e), as applicable, under the Exchange Act, and (ii) to effect the treatment of the Option Plans and Options set forth in this Section 2.3 , including obtaining any and all necessary consents.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as set forth in a schedule delivered to Parent prior to the execution of this Agreement (the “ Company Disclosure Schedule ”), the Company represents and warrants to Parent and Merger Sub as set forth below.  Each exception set forth in the Company Disclosure Schedule is identified by reference to, or has been grouped under a heading referring to, a specific individual section or subsection of this Agreement and relates only to such section or subsection, provided , however , that the inclusion of any item referenced in one section of the Company Disclosure Schedule shall be deemed to refer to any other section of the Company Disclosure Schedule (and accordingly to the applicable sections of this Agreement which contain references to the Company Disclosure Schedule), whether or not an explicit cross-reference appears, if the applicability of such item to the other section is readily apparent.

Section 3.1         Organization .  (a)  The Company is a corporation duly organized, validly existing and in good standing under the Laws of the Commonwealth of Pennsylvania and has full corporate power and authority to own, lease and operate its properties and to carry on its business as it is now being conducted.

(b)        The Company is duly qualified or licensed to do business as a foreign corporation and is in good standing in each jurisdiction where such qualification or licensing is necessary, except where the failure to be so qualified or licensed or in good standing would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.  As used in this Agreement, “ Company Material Adverse Change ” or “ Company Material Adverse Effect ” means any change, event, violation, inaccuracy, circumstance, effect or development that (i) is materially adverse in relation to the financial condition, properties, assets,

6

 

 

liabilities, business, operations or results of operations of the Company and the Company Subsidiaries, taken as a whole, or (ii) materially impedes or delays the consummation of the transactions contemplated by this Agreement; provided , however , that any adverse change, event, violation, inaccuracy, circumstance or effect arising from or related to: (A) conditions affecting the industries in which the Company and the Company Subsidiaries do business (provided, in each such case, that such conditions do not affect the Company and the Company Subsidiaries, taken as a whole, disproportionately, taking into account the position in their industries of the Company and the Company Subsidiaries, as compared to the Company’s and the Company Subsidiaries’ competitors); (B) national or international political, economic or social conditions, including the engagement by the United States in hostilities or resulting from acts of terrorism or war; or (C) the public announcement of the transactions contemplated by this Agreement or the identity of Parent, shall not be taken into account in determining whether a Company Material Adverse Effect has occurred or would reasonably be expected to occur.  The Company has heretofore delivered or made available to Parent complete and correct copies of the Articles of Incorporation and Bylaws (or similar organizational documents) of the Company and each Company Subsidiary as presently in effect.

Section 3.2         Subsidiaries and Affiliates .  (a)  Section 3.2(a)(i) of the Company Disclosure Schedule sets forth the name, jurisdiction of incorporation or organization and authorized and outstanding capital of each Company Subsidiary.  Other than with respect to the Company Subsidiaries, the Company does not own, directly or indirectly, any capital stock or other equity securities of any Person or have any direct or indirect equity or other similar ownership interest in any Person.  No Shares are held by a Company Subsidiary.  Except as set forth in Section 3.2(a)(ii) of the Company Disclosure Schedule, all of the outstanding capital stock (or similar equity interests) of each Company Subsidiary is (or are) owned by the Company or a Company Subsidiary free and clear of all liens, charges, security interests, options, claims, mortgages, pledges, or other encumbrances of any nature whatsoever (“ Encumbrances ”), and is (or are) validly issued, fully paid and nonassessable.  As used in this Agreement: the term “ Company Subsidiary ” means each Person which is a Subsidiary of the Company; the term “ Subsidiary ” means with respect to any party, any corporation, partnership, limited liability company or other organization or entity, whether incorporated or unincorporated, of which (i) at least a majority of the securities or other interests having by their terms ordinary voting power to elect a majority of the board of directors or other governing body performing similar functions with respect to such organization is directly or indirectly owned or controlled by such party and/or by any one or more of its Subsidiaries or (ii) in the case of a partnership only, such party or any other Subsidiary of such party is a general partner (excluding any such partnership where such party or any Subsidiary of such party does not have a majority of the voting interest in such partnership); and the term “ Person ” means a natural person, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Entity or other entity or organization.

(b)        Each Company Subsidiary is duly organized, validly existing and in good standing under the Laws of its jurisdiction of incorporation or organization and has full power and authority to own, lease and operate its properties and to carry on its business as it is now being conducted.  Each Company Subsidiary is duly qualified or licensed to do business as a foreign corporation or limited liability company, as the case may be, and is in good standing in each jurisdiction where such qualification or licensing is necessary, except where the failure to

7

 

 

be so qualified or licensed or in good standing would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

Section 3.3         Capitalization .  (a)  The authorized capital stock of the Company consists of 200,000,000 shares of common stock, par value $0.20 per share.  As of the date hereof, (i) 106,757,046 Shares are issued and outstanding, (ii) no Shares are issued and held in the treasury of the Company, (iii) a total of 3,245,888 Shares are reserved for issuance upon the exercise of outstanding Options, of which a total of 2,205,135 Shares are subject to Options that are vested and exercisable as of the date hereof and (iv) a total of 4,683,110 Shares are available for future grant under the Option Plans.  All of the issued and outstanding shares of the Company’s common stock are, and all shares that may be issued pursuant to the exercise of outstanding Options will be, duly authorized, validly issued, fully paid and non-assessable.  There is no indebtedness having general voting rights on matters on which shareholders of the Company may vote (or convertible into securities having such rights) (“ Voting Debt ”) of the Company or any Company Subsidiary issued and outstanding.  Except as disclosed in this Section 3.3 or as set forth in Section 3.3(a) of the Company Disclosure Schedule, and except for the Rights, (i) there are no existing options, warrants, calls, pre-emptive rights, subscriptions or other rights, restricted stock awards, agreements, arrangements, understandings or commitments of any kind relating to the issued or unissued capital stock of, or other equity interests in, the Company or any Company Subsidiary obligating the Company or any Company Subsidiary to issue, transfer, register or sell or cause to be issued, transferred, registered  or sold any shares of capital stock or Voting Debt of, or other equity interest in, the Company or any Company Subsidiary or securities convertible into or exchangeable for such shares or equity interests or other securities, or obligating the Company or any Company Subsidiary to grant, extend or enter into any such option, warrant, call, subscription or other right, restricted stock award, agreement, arrangement, understanding or commitment, and (ii) there are no outstanding agreements, arrangements, understandings or commitments of the Company or any Company Subsidiary to repurchase, redeem or otherwise acquire any Shares or the capital stock of the Company or any capital stock or other equity interests in any Company Subsidiary or any Person or to provide funds to make any investment (in the form of a loan, capital contribution or otherwise) in any Company Subsidiary or any Person, except for loans to wholly-owned Company Subsidiaries in the ordinary course of business.  Except as set forth on Section 3.3(a) of the Company Disclosure Schedule, there are no outstanding or authorized stock appreciation, phantom stock, profit participation or other similar rights with respect to the Company or any Company Subsidiary.  The Company has made available to Parent a complete and correct copy of the Rights Agreement, as amended to the date of this Agreement.

(b)        Section 3.3(b) of the Company Disclosure Schedule sets forth, with respect to each Option outstanding as of October 6, 2006, (i) the number of Shares issuable therefor, (ii) the exercise price payable therefor upon the exercise of each such Option, (iii) the date on which such Option was granted, (iv) the Option Plan under which such Option was granted and whether such Option is an “incentive stock option” (as defined in Section 422 of the Code) or a nonqualified stock option, (v) for each Option, whether such Option is held by a Person who is not an employee of the Company or any Company Subsidiary, (vi) the extent to which such Option is vested and exercisable as of the date hereof and the extent of acceleration as a result, either alone, or together with another event or occurrence, of the transactions contemplated by this Agreement and (vii) the date on which such Option expires.  As of the close

8

 

 

of business on July 20, 2006, the weighted average exercise price of all outstanding Options was $8.53 per share of Company common stock .  Since July 20, 2006, the Company has not granted or issued any Options.  All of  the Options have been granted solely to employees, consultants (who are individuals) or directors of the Company in the ordinary course of business consistent with past practice.  The per Share exercise price of each Option was not (and is not deemed for purposes of Section 409A of the Code to be) less than the fair market value of a Share as of the date of grant of such Option.  All grants of Options were validly issued and properly approved by the Company Board of Directors (or a duly authorized committee or subcommittee thereof) in compliance with all applicable Laws and recorded on the Financial Statements in accordance with GAAP.

(c)        There are no shareholder agreements, voting trusts or other agreements or understandings to which the Company or any Company Subsidiary is a party relating to the voting or disposition of any shares of the capital stock of the Company or any of the Company Subsidiaries or granting to any person or group of persons the right to elect, or to designate or nominate for election, a director to the board of directors of the Company or any Company Subsidiary.

(d)        All dividends or distributions on equity securities of the Company and any Company Subsidiary that is not wholly owned directly or indirectly by the Company that have been declared or authorized have been paid in full, other than the Company’s regular quarterly cash dividend permitted to be paid pursuant to Section 5.1(b) .

Section 3.4         Authorization; Validity of Agreement; Company Action .  The Company has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions provided for or contemplated by this Agreement, including, but not limited to, the Merger.  The execution, delivery and performance by the Company of this Agreement and the consummation by it of the transactions contemplated hereby have been duly and validly authorized by the Company Board of Directors, and, other than the adoption of this Agreement by the affirmative vote of the holders of a majority of the outstanding Shares (the “ Company Shareholder Approval ”), no other corporate proceeding on the part of the Company is necessary to authorize the execution, delivery and performance by the Company of this Agreement and the consummation by it of the transactions contemplated hereby.  This Agreement has been duly and validly executed and delivered by the Company, and, assuming due and valid authorization, execution and delivery hereof by Parent and Merger Sub, is a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar Laws relating to creditors’ rights generally and to general principles of equity.

Section 3.5             Board Approvals .  As of the date hereof, the Company Board of Directors, at a meeting duly called and held, has unanimously determined that the transactions contemplated by this Agreement are in the best interests of the Company and its shareholders and resolved to recommend that the shareholders of the Company adopt this Agreement (collectively, the “ Company Board Recommendation ”), and none of the aforesaid actions by the Company Board of Directors has been amended, rescinded or modified as of the date hereof.

 

9

 

 

Section 3.6         Required Vote .  The Company Shareholder Approval is the only vote of the holders of any class or series of the Company’s capital stock necessary to adopt this Agreement.

Section 3.7         Consents and Approvals; No Violations .  None of the execution, delivery or performance of this Agreement by the Company, the consummation by the Company of the transactions contemplated hereby or compliance by the Company with any of the provisions of this Agreement will (i) conflict with or result in any breach of any provision of the Articles of Incorporation, the Bylaws or similar organizational documents of the Company or any Company Subsidiary, (ii) require any filing by the Company with, or permit, authorization, consent or approval of, any court, arbitral tribunal, administrative agency or commission or other governmental or other regulatory authority or agency, foreign or domestic (a “ Governmental Entity ”), except for (A) compliance with any applicable requirements of the Exchange Act or of the New York Stock Exchange, (B) any filings as may be required under the PBCL in connection with the Merger, (C) the filing with the SEC and the New York Stock Exchange of the Proxy Statement and (D) any filings in connection with the applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “ HSR Act ”) or under the antitrust or competition Laws of applicable European Union or other foreign jurisdictions, (iii) except as set forth in Section 3.7 of the Company Disclosure Schedule, result in a violation or breach of or the loss of any benefit under, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration) under, or result in the creation of any Encumbrance on the assets and properties of the Company or any Company Subsidiary under, any of the terms, conditions or provisions of any note, bond, mortgage, lien, indenture, lease, license, contract, agreement, arrangement or understanding or other instrument or obligation (each, a “ Contract ”) to which the Company or any Company Subsidiary is a party or by which any of them or any of their respective properties or assets may be bound or (iv) assuming that all consents, approvals, authorizations and other actions described in subsection (ii) have been obtained and all filings and obligations in subsection (ii) have been made or complied with, conflict with or violate any Law applicable to the Company, any Company Subsidiary or any of their respective properties or assets, except in the case of clauses (ii) or (iii) where (x) any failure to obtain such permits, authorizations, consents or approvals, (y) any failure to make such filings or (z) any such conflicts, violations, breaches, losses, defaults or Encumbrances would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

Section 3.8         Company SEC Documents and Financial Statements .

(a)        Since August 1, 2003, the Company has timely filed with the SEC all forms, reports, schedules, registration statements, definitive proxy statements, exhibits, and other documents required by it to be filed under the Exchange Act or the Securities Act (collectively, the “ Company SEC Documents ”).  As of its filing date or, if amended or supplemented prior to the date of this Agreement, as of the date of the last such amendment or supplement, each Company SEC Document fully complied with the applicable requirements of the Exchange Act and the Securities Act, as the case may be, and the applicable rules and regulations of the SEC thereunder applicable to such Company SEC Document.  As of its filing date or, if amended or supplemented prior to the date of this Agreement, as of the date of the last such amendment or supplement, each Company SEC Document filed pursuant to the Exchange

10

 

 

Act did not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.  Each Company SEC Document that is a registration statement, as amended or supplemented, if applicable, filed pursuant to the Securities Act, as of the date such registration statement or amendment or supplement became effective, did not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.  None of the Company Subsidiaries is required to file any forms, reports or other documents with the SEC pursuant to the Exchange Act.  All of the consolidated balance sheets and the related consolidated statements of income, consolidated statements of comprehensive income and shareholders’ equity and consolidated statements of cash flows (including, in each case, any related notes and schedules thereto) of the Company included in the Company SEC Documents (collectively, the “ Financial Statements ”) (i) comply as to form in all material respects with the applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, (ii) have been prepared in accordance with United States generally accepted accounting principles (“ GAAP ”) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto and except, in the case of the unaudited interim statements, as may be permitted under Form 10-Q of the Exchange Act) and (iii) fairly present in all material respects the consolidated financial position and the consolidated results of operations and cash flows (subject, in the case of unaudited interim financial statements, to normal and recurring year-end adjustments) of the Company and its consolidated Subsidiaries as of the times and for the periods referred to therein.

(b)        The Company has heretofore furnished to Parent complete and correct copies of all comment letters from the SEC since August 1, 2003 through the date of this Agreement with respect to any of the Company SEC Documents and all correspondence since August 1, 2003 through the date of this Agreement from or with the SEC or the Department of Justice relating to accounting, sales and other business practices of the Company or any Company Subsidiary.  As of the date of this Agreement, there are no outstanding or unresolved comments in comment letters received from the SEC staff with respect to any of the Company SEC Documents.

(c)        The Company is in compliance in all material respects with the applicable provisions of the Sarbanes-Oxley Act and the applicable listing and governance rules and regulations of the New York Stock Exchange.

(d)        The Company maintains a system of internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) sufficient to provide reasonable assurance (i) that the Company maintains records that in reasonable detail accurately and fairly reflect their respective transactions and dispositions of assets, (ii) that transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP, (iii) that receipts and expenditures are executed only in accordance with authorizations of management and the Company Board of Directors and (iv) regarding prevention or timely detection of the unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the Company’s consolidated financial statements. The Company has evaluated the effectiveness of the Company’s internal control over financial reporting and, to the extent required by applicable Law, presented in any applicable Company SEC Document that is

11

 

 

a report on Form 10-K or Form 10-Q or any amendment thereto its conclusions about the effectiveness of the internal control over financial reporting as of the end of the period covered by such report or amendment based on such evaluation. Based on the most recent evaluation by the Company of its internal control over financial reporting, to the Company’s knowledge and except as set forth in Section 3.8(d) of the Company Disclosure Schedule, the Company had no (A) significant deficiencies or material weaknesses in the design or operation of internal control over financial reporting that are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information or (B) fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.  Except as disclosed in the Company SEC Documents, the Company has not identified any material weaknesses in the design or operation of the Company’s internal control over financial reporting.

(e)        The Company’s “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) are reasonably designed to ensure that all information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that all such information is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding required disclosure as required under the Exchange Act.

(f)         To the knowledge of the Company, as of the date of this Agreement, except as described in the Company SEC Documents or in Section 3.8(f) of the Company Disclosure Schedule, there are no SEC inquiries or investigations, other governmental inquiries or investigations or internal investigations pending or threatened in each case regarding any accounting practices of the Company or any malfeasance by any director or executive officer of the Company.  Except as set forth in Company compliance reports made available to Parent or in Section 3.8(f) of the Company Disclosure Schedule, since August 1, 2003 through the date of this Agreement, there have been no internal investigations regarding accounting or revenue recognition discussed with, reviewed by or initiated at the direction of the chief executive officer, chief financial officer, general counsel or similar legal officer, the Board or any committee thereof.

Section 3.9         Absence of Certain Changes .  Except as specifically permitted or required by this Agreement, since July 31, 2006, (a) each of the Company and each Company Subsidiary has conducted its respective business only in the ordinary course of business consistent with past practice, (b) neither the Company nor any Company Subsidiary has suffered any Company Material Adverse Change and (c) except as set forth in Section 3.9 of the Company Disclosure Schedule, neither the Company nor any Company Subsidiary has taken any action that, if taken during the period from the date of this Agreement through the Effective Time, would constitute a breach of any of the covenants set forth in Section 5.1 .

Section 3.10       No Undisclosed Liabilities .  Except (a) as disclosed in the Company SEC Documents filed prior to the date hereof or in Section 3.10 of the Company Disclosure Schedule and (b) for liabilities and obligations (i) incurred in the ordinary course of business consistent with past practice since July 31, 2006 or (ii) as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, neither the

12

 

 

Company nor any Company Subsidiary has incurred any liabilities or obligations of any nature, whether or not accrued, contingent, absolute or otherwise and whether or not required to be reflected in the Financial Statements in accordance with GAAP.

Section 3.11       Litigation; Orders .  Except as set forth in Section 3.11 of the Company Disclosure Schedule, there is no suit, charge, claim, action, proceeding, including, without limitation, arbitration proceeding or alternative dispute resolution proceeding, or investigation pending or, to the knowledge of the Company, threatened against, affecting or naming as a party thereto the Company or any Company Subsidiary that would, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.  No judgment, decree, injunction, rule or order of any Governmental Entity is outstanding against the Company or any Company Subsidiary or any of their respective properties or assets that would, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

Section 3.12       Employee Benefit Plans; ERISA .

(a)        Except as disclosed in the Company SEC Documents filed with the SEC prior to the date of this Agreement or as set forth in Section 3.12(a) of the Company Disclosure Schedule or as expressly contemplated by this Agreement, there exists no employment, consulting, retention, change in control, severance or termination agreement, arrangement or understanding between the Company or any of the Company Subsidiaries and any individual current or former employee, officer or director of the Company or any of the Company Subsidiaries with respect to which the annual cash, noncontingent payments thereunder exceed $1,000,000.

(b)        Section 3.12(b) of the Company Disclosure Schedule contains a correct and complete list of all (i) “employee pension benefit plans” (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”)) (sometimes referred to herein as “ Pension Plans ”), including any such Pension Plans that are “multiemployer plans” (as such term is defined in Section 4001(a)(3) of ERISA) (collectively, the “ Multiemployer Pension Plans ”), (ii) “employee welfare benefit plans” (as defined in Section 3(1) of ERISA), and (iii) all severance, retention, change in control, employment, stock purchase and stock option plans, agreements or arrangements, and (iv) all other material benefit plans, agreements or arrangements, including but not limited to, any bonus, deferred compensation, consulting, pension, profit-sharing, retirement, insurance, incentive or equity compensation or other fringe benefit plan, agreement, arrangement or practice maintained, contributed to or required to be contributed to, by the Company or any of the Company Subsidiaries or any trade or business, whether or not incorporated, that, together with the Company would be deemed a “single employer” within the meaning of Section 4001(b) of ERISA or Section 414 of the Code (each, an “ ERISA Affiliate ”), for the benefit of any current or former employees, officers, consultants or directors of the Company or any of the Company Subsidiaries (including individuals who perform or performed services outside of the United States, or with respect to which the Company or any of the Company Subsidiaries could reasonably have any liability (collectively, the “ Benefit Plans ”). The Company has delivered or made available to Parent and Merger Sub correct and complete copies of the three most recent annual reports on Form 5500 and all schedules thereto filed with respect to each Benefit Plan, to the extent applicable.

13

 

 

(c)        Each Benefit Plan is and has at all times been operated and administered in accordance with its terms and in compliance in all material respects with applicable Law, including but not limited to ERISA and the Code.  Each Benefit Plan has been administered in good faith compliance with Section 409A of the Code to the extent applicable.

(d)        Each Pension Plan intended to be “qualified” within the meaning of section 401(a) of the Code has received a currently effective determination letter from the Internal Revenue Service that such Pension Plan is so qualified and exempt from taxation under section 401(a) and 501(a) of the Code, and, to the knowledge of the Company, no condition exists that would be expected to materially adversely affect such qualification.

(e)        Except as set forth in Section 3.12(e) of the Company Disclosure Schedule, none of the Benefit Plans is, and none of the Company or any of the Company Subsidiaries has, during the past six years, ever maintained or had an obligation to contribute to (i) a “single employer plan” (as such term is defined in Section 4001(a)(15) of ERISA) subject to Section 412 of the Code or Title IV of ERISA, (ii) a “multiple employer plan” or “multiple employer welfare arrangement” (as such terms are defined in ERISA) or (iii) a funded welfare benefit plan (as such term is defined in Section 419 of the Code).  There are no unpaid contributions due prior to the date hereof with respect to any Benefit Plan that are required to have been made under the terms of such Benefit Plan, any related insurance contract or any applicable Law and all contributions due have been timely made.

(f)         None of the Company or any of the Company Subsidiaries has incurred any liability or taken any action, and neither the Company nor any Company Subsidiary has any knowledge of any action or event, that could reasonably be expected to cause any one of them to incur any liability (i) under Section 412 of the Code or Title IV of ERISA with respect to any “single-employer plan” (as such term is defined in Section 4001(a)(15) of ERISA), (ii) under Title IV of ERISA, including on account of a partial or complete withdrawal (as such term is defined in Sections 4203 and 4205 of ERISA, respectively) with respect to any Multiemployer Pension Plan, (iii) on account of unpaid contributions to any Multiemployer Pension Plan, (iv) on account of the reorganization of any Multiemployer Pension Plan or increased contributions to avoid a reduction in benefits or an excise tax or (v) by reason of Section 4069, 4204 or 4212  of ERISA. With respect to each of the Benefit Plans that is subject to Title IV of ERISA, the present value of projected benefit obligations under such plan, as determined by the Company Plan’s actuary based upon the actuarial assumptions used for funding purposes in the most recent actuarial report prepared by such plan’s actuary with respect to such plan, did not, as of its latest valuation date, exceed the then current value of the assets of such plan allocable to such projected benefit obligations.  With respect to Benefit Plans that are Multiemployer Pension Plans and are subject to Title IV of ERISA, to the best of the Company’s knowledge, the aggregate withdrawal liability of the Company and any of its Subsidiaries and ERISA Affiliates, computed as if a complete withdrawal by the foregoing had occurred under all such Benefit Plans on the date hereof, would not exceed $100,000.

(g)        None of the Company, any of the Company Subsidiaries or any ERISA Affiliate has engaged in a “prohibited transaction” (as such term is defined in Section 406 of ERISA and Section 4975 of the Code) or any other breach of fiduciary responsibility with

14

 

 

respect to any Benefit Plan that, in either case, reasonably could be expected to subject the Company or any of the Company Subsidiaries to any material tax or penalty.

(h)        Except as set forth in Section 3.12(h) of the Company Disclosure Schedule, with respect to any Benefit Plan: (i) no filing, application or other matter is pending with the Internal Revenue Service, the Pension Benefit Guaranty Corporation, the United States Department of Labor or any other governmental body, and (ii) there is no action, suit, audit, investigation or claim pending, or to the Company’s knowledge, threatened or anticipated, other than routine claims for benefits.

(i)         Except as set forth in Section 3.12(i) of the Company Disclosure Schedule, none of the Company or any of the Company Subsidiaries has any obligation to provide any health benefits or other non-pension benefits (whether or not insured) to retired or other former employees, directors or consultants, except as specifically required by Part 6 of Title I of ERISA (“ COBRA ”).

(j)         Except as set forth in Section 3.12(j) of the Company Disclosure Schedule, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby, or any termination of employment or service (or other event or occurrence) in connection therewith will (i) entitle any current or former employee, director or consultant of the Company or any of the Company Subsidiaries to any payment or benefit (or result in the funding of any such payment or benefit) or result in any forgiveness of indebtedness with respect to any such persons, (ii) increase the amount of any compensation, equity award or other benefits otherwise payable by the Company or any Company Subsidiary or (iii) result in the acceleration of the time of payment, funding or vesting of any compensation, equity award or other benefits except as required under Section 411(d)(3) of the Code.

(k)        To the knowledge of the Company, except as set forth in Section 3.12(k) of the Company Disclosure Schedule, no Benefit Plan is a “nonqualified deferred compensation plan” subject to Section 409A of the Code.  No amounts payable (individually or collectively and whether in cash, capital stock of the Company or other property) under any of the Benefit Plans or any other contract, agreement or arrangement with respect to which the Company or any Company Subsidiary may have any liability could fail to be deductible for federal income tax purposes by virtue of Section 404, 162(m) or Section 280G of the Code.

(l)         To the knowledge of the Company, neither the Company nor any of its ERISA Affiliates has used the services or workers provided by third party contract labor suppliers, temporary employees, “leased employees” (as that term is defined in Section 414(n) of the Code), or individuals who have provided services as independent contractors to an extent that would reasonably be expected to result in the disqualification of any of the Benefit Plans or the imposition of penalties or excise taxes with respect to the Plans by the Internal Revenue Service, the Department of Labor, or the Pension Benefit Guaranty Corporation.

(m)       Except as set forth in Section 3.12(m) of the Company Disclosure Schedule, neither the Company nor any Company Subsidiary has made any contributions to any Benefit Plan in the form of Shares.

15

 

 

(n)        The foregoing representations contained in Sections 3.12(b) through 3.12(m) are accurate with respect to Benefit Plans covering individuals located outside the United States (the “ International Benefit Plans ”), to the extent applicable.  Each International Benefit Plan has been established, maintained and administered in compliance in all material respects with its terms and conditions and with the requirements prescribed by any and all statutory or regulatory laws that are applicable to such plan.  Except as set forth in Section 3.12(n) of the Company Disclosure Schedule, no International Benefit Plan has unfunded liabilities that, as of the Effective Time, will not be offset by insurance or is not fully accrued.  Except as required by law or in relation to benefits previously vested, earned or accrued, no condition exists that would prevent the Company or Parent from terminating or amending any International Benefit Plan at any time for any reason.

Section 3.13       Taxes .  Except as set forth in Section 3.13 of the Company Disclosure Schedule:

(a)        (i) the Company and each of the Company Subsidiaries has duly and timely filed, or will duly and timely file, all Tax Returns required to be filed by it on or before the Closing Date, and each such Tax Return has been, or will be, prepared in compliance with all applicable Laws and is true, correct and complete in all respects; (ii) the Company and each of the Company Subsidiaries has paid (or the Company has paid on the Company Subsidiaries’ behalf) or will pay all Taxes shown as due on such returns and all other Taxes due and payable prior to the Closing Date (whether or not shown as due on any Tax Return) except such Taxes as are currently being contested in good faith and for which adequate reserves, as applicable, have been established in the Company’s Financial Statements in accordance with GAAP; (iii) the Financial Statements reflect, in accordance with GAAP, an adequate reserve for all Taxes payable by the Company and the Company Subsidiaries for all taxable periods and portions thereof through the date of such Financial Statements; and (iv) neither the Company nor any Company Subsidiary has incurred any  liability for Taxes subsequent to the date of such most recent Financial Statements other than in the ordinary course of such Company’s or Company Subsidiary’s business.

(b)        Except as set forth in Section 3.13(b ) of the Company Disclosure Schedule, (i) no Tax Return of the Company or any of the Company Subsidiaries is under audit or examination by any taxing authority, no notice of such an audit or examination or any other audit or examination with respect to Taxes has been received by the Company or any of the Company Subsidiaries, and no deficiencies for Taxes have been claimed, proposed, assessed or threatened against the Company or any Company Subsidiary by any taxing authority; (ii) each deficiency resulting from any audit or examination relating to Taxes by any taxing authority has been paid, except for deficiencies currently being contested in good faith and for which adequate reserves, as applicable, have been established in the Company’s Financial Statements in accordance with GAAP; (iii) there are no liens for Taxes upon the assets of the Company or any Company Subsidiary except liens relating to current Taxes not yet due and payable; (iv) all Taxes which the Company or any Company Subsidiary are required by Law to withhold or to collect for payment have been duly withheld and collected and any such amounts that are required to be remitted to any taxing authority have been duly and timely remitted; (v) none of the Company or the Company Subsidiaries has consented to extend the time in which any Tax may be assessed or collected by any taxing authority; (vi) no claim has been made against the

16

 

 

Company or any Company Subsidiary by any taxing authority in a jurisdiction where the Company or any of the Company Subsidiaries does not file Tax Returns that the Company or Company Subsidiary is or may be subject to taxation in that jurisdiction, and the Company is not aware of any Tax Return filing requirement that is not being complied with; and (vii) no power of attorney that would be in force after the Closing Date has been granted by the Company or any Company Subsidiaries with respect to Taxes.

(c)        Except as set forth in Section 3.13(c) of the Company Disclosure Schedule, there is no contract or arrangement, plan or agreement by or with the Company or any Company Subsidiary covering any person that, individually or collectively, could give rise to the payment of any amount by the Company or a Company Subsidiary that would not be deductible by the Company or such Company Subsidiary by reason of Section 280G or Section 162(m) of the Code.

(d)        Each of the Company and the Company Subsidiaries has made available to Parent and Merger Sub true, correct and complete copies of all federal income Tax Returns, and all other material Tax Returns, examination reports and statements of deficiencies assessed against or agreed to by any of the Company or the Company Subsidiaries that have been filed by any of the Company or the Company Subsidiaries for the taxable years ending July 31, 2002, 2003, 2004 and 2005.

(e)        The consolidated federal income Tax Returns of the Company and the Company Subsidiaries have been examined, and the statute of limitations closed, with respect to all taxable years through and including July 31, 2000.  The Commonwealth of Pennsylvania income Tax Returns of the Company have been settled with respect to all taxable years through and including July 31, 2003.

(f)         None of the Company or the Company Subsidiaries (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), (ii) is a party to or bound by any Tax allocation, sharing or indemnification agreement or other similar arrangement with any person other than the Company and the Company Subsidiaries or (iii) has any liability for the Taxes of any person (other than any of the Company or the Company Subsidiaries) under Treas. Reg. §1.1502-6 (or any similar provision of Law), as a transferee or successor, by contract, or otherwise.

(g)        Neither the Company nor any Company Subsidiary has constituted a “distributing corporation” or a “controlled corporation” in a distribution of stock purported to or intended to be governed by Section 355 or Section 361 of the Code.

(h)        Neither the Company nor any Company Subsidiary has participated in, or is currently participating in, a “reportable transaction” within the meaning of Treas. Reg. § 1.6011-4(b) or any transaction requiring disclosure under a corresponding or similar provision of state, local or foreign Law.

(i)         The Company is not a “United States real property holding corporation” within the meaning of Section 897(c)(2) of the Code and has not been (and will not

17

 

 

be) such a United States real property holding corporation during the five year period ending on the Closing Date.

(j)         There are no Tax rulings, requests for rulings, applications for change in accounting methods or closing agreements that would reasonably be expected to affect liabilities for Taxes for the current Tax period or for any period after the Effective Time, unless any such ruling, change in accounting method or closing agreement had a similar effect on Tax liabilities for any prior Tax period.

(k)        Neither the Company nor any Company Subsidiary will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Effective Time because of: (i) any intercompany transactions or excess loss account described in Treasury regulation under Section 1502 of the Code (or any corresponding or similar provision of state, local or foreign Tax law) that occurred or existed on or prior to the Effective Time; (ii) any installment sale or open transaction disposition made on or prior to the date hereof; (iii) any prepaid amount received on or prior to the Effective Time or (iv) Section 481(a) of the Code (or an analogous provision of state, local, or foreign Law), by reason of a change in accounting method made prior to the Effective Time.

Section 3.14           Material Contracts .

(a)        Except as disclosed in Section 3.14(a) of the Company Disclosure Schedule, neither the Company nor any of the Company Subsidiaries is, nor, to the Company’s knowledge, is any other party, in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any Material Contract to which it is a party, except for such defaults which would not, individually or in the aggregate, reasonably be expected to result in a Company Material Adverse Effect; and, to the knowledge of the Company, there has not occurred any event that, with the lapse of time or giving of notice or both, could constitute such a default other than such events which would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.  Each of the Material Contracts is in full force and effect and is enforceable in accordance with its terms.

(b)        Except as otherwise set forth as an exhibit to a Company SEC Document filed prior to the date of this Agreement,  Section 3.14(b) of the Company Disclosure Schedule sets forth a list as of the date of this Agreement of (i) since January 1, 2003, all agreements, contracts or letters of intent regarding the acquisition of a material person or business, whether in the form of an asset purchase, merger, consolidation or otherwise (including any such agreement, contract or letter of intent that has closed but under which one or more of the parties has executory indemnification, earn-out or other liabilities) to which the Company or any Company Subsidiary is a party, (ii) all credit agreements, indentures, and other agreements related to any indebtedness for borrowed money of the Company or any Company Subsidiary, (iii) all material joint venture or other similar material agreements to which the Company or any Company Subsidiary is a party, (iv) all material lease agreements to which the Company or any Company Subsidiary is a party other than leases with respect to the Leased Real Property, (v) contracts or groups of related contracts with the same party or group of parties the performance of which involves annual consideration in excess of $10,000,000 which are not cancelable by the

18

 

 

Company on thirty (30) days’ or less notice without premium or penalty, (vi) agreements under which the Company has granted any person registration rights (including demand and piggy-back registration rights) that have not been fulfilled, (vii) all contracts or agreements purporting to restrict or prohibit the Company or any Company Subsidiary from engaging or competing in any business or engaging or competing in any business in any geographic area, (viii) all labor agreements, collective bargaining agreements or other labor related contracts (including work rules and practices) to which the Company or any Company Subsidiary is a party to or otherwise bound by with respect to any labor union, labor organization, trade union, works council or similar organization or association of employees and (ix) each customer or supply agreement or contract to which the Company or any Company Subsidiary is a party with any Governmental Entity (whether the Company or any Company Subsidiary is a prime contractor or subcontractor under the contract) under which the Company or any Company Subsidiary would receive or pay more than $5,000,000 and any pending bid or proposal under any proposed prime contract or subcontract not relating to existing products under which the Company or any Company Subsidiary would receive or pay more than $5,000,000 and pursuant to which the Company would have a binding obligation to perform if such pending bid or proposal was accepted.  All of the items set forth in clauses (i) through (ix) above together with (v) each “material contract” (as such term is defin