EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
INTUIT INC.
ELAN
ACQUISITION CORPORATION
AND
ELECTRONIC CLEARING HOUSE, INC.
Dated as of December 14, 2006
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ARTICLE I
THE MERGER..................................................1
1.1 The
Merger..................................................1
1.2 Effective
Time; Closing.....................................2
1.3 Effect of
the Merger........................................2
1.4 Articles
of Incorporation and Bylaws of
Surviving Corporation.....................................2
1.5 Directors
and Officers of Surviving Corporation.............3
1.6
Effect on Capital
Stock.....................................3
1.7 Dissenting
Shares...........................................5
1.8 Surrender
of Certificates...................................5
1.9 No Further
Ownership Rights in Shares.......................7
1.10
Lost, Stolen or Destroyed Certificates......................7
1.11
Taking of Necessary Action; Further Action..................7
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY...................8
2.1
Organization and Qualification; Subsidiaries................8
2.2 Articles
of Incorporation and Bylaws........................9
2.3
Capitalization..............................................9
2.4 Authority
Relative to this Agreement.......................11
2.5 No
Conflict; Required Filings and Consents.................11
2.6
Compliance.................................................12
2.7 SEC
Filings; Financial Statements; Internal Controls.......13
2.8 No
Undisclosed Liabilities.................................15
2.9 Absence of
Certain Changes or Events.......................15
2.10
Absence of Litigation......................................16
2.11
Employee Benefit Plans.....................................16
2.12
Proxy Statement............................................21
2.13
Restrictions on Business Activities........................22
2.14
Title to Property..........................................22
2.15
Taxes......................................................23
2.16
Environmental Matters......................................25
2.17
Third Party Expenses.......................................26
2.18
Intellectual Property......................................27
2.19
Contracts..................................................31
2.20
Customers and Suppliers....................................34
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2.21
Insurance..................................................34
2.22
Opinion of Financial Advisor...............................34
2.23
Board Approval.............................................34
2.24
Vote Required..............................................35
2.25 State Takeover
Statutes; Rights Agreement..................35
2.26
Transactions with Affiliates...............................35
2.27
Illegal Payments, Etc......................................35
2.28
Privacy....................................................35
2.29
Compliance With Applicable Standards;
Merchant Agreements......................................36
2.30
Federal Reserve Regulations................................38
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT
AND MERGER SUB...........................................38
3.1 Corporate
Organization.....................................38
3.2 Authority
Relative to this Agreement.......................38
3.3 No
Conflict; Required Filings and Consents.................39
3.4 Proxy
Statement............................................39
3.5 Sufficient
Funds...........................................40
3.6 No
Business Activities.....................................40
3.7 Ownership
of Company Stock.................................40
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME........................40
4.1 Conduct of
Business by Company.............................40
4.2 No
Control.................................................44
ARTICLE V
ADDITIONAL AGREEMENTS......................................44
5.1 Proxy
Statement............................................44
5.2 Meeting of
Company Stockholders............................44
5.3
Confidentiality; Access to Information.....................46
5.4 No
Solicitation............................................46
5.5 Public
Disclosure..........................................49
5.6 Rights
Agreement...........................................50
5.7 Reasonable
Efforts; Notification...........................50
5.8 Third
Party Consents; Other Actions........................51
5.9
Indemnification............................................52
5.10 Regulatory Filings;
Reasonable Efforts.....................53
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5.11
Termination of Certain Benefit Plans.......................53
5.12
Employee Benefits..........................................54
5.13
FIRPTA Certificate.........................................54
ARTICLE VI
CONDITIONS TO THE MERGER...................................55
6.1 Conditions
to Obligations of Each Party
to Effect the Merger.....................................55
6.2 Additional
Conditions to Obligations of Company............55
6.3 Additional
Conditions to the Obligations
of Parent and Merger Sub.................................56
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER..........................58
7.1
Termination................................................58
7.2 Notice of
Termination; Effect of Termination...............61
7.3 Fees and
Expenses..........................................61
7.4
Amendment..................................................63
7.5 Extension;
Waiver..........................................63
ARTICLE VIII GENERAL
PROVISIONS.........................................63
8.1
Non-Survival of Representations and Warranties.............63
8.2
Notices....................................................64
8.3
Interpretation; Knowledge..................................65
8.4
Counterparts...............................................66
8.5 Entire
Agreement; Third Party Beneficiaries................66
8.6
Severability...............................................66
8.7 Other
Remedies; Specific Performance.......................67
8.8 Governing
Law..............................................67
8.9 Rules of
Construction......................................67
8.10
Assignment.................................................67
8.11
Waiver of Jury Trial.......................................67
INDEX OF EXHIBITS
EXHIBIT A
Form of Company Voting Agreement
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT
AND PLAN OF MERGER is made and entered into as of
December 14,
2006 (the "AGREEMENT"), by and among Intuit inc., a Delaware
corporation ("PARENT"), Elan Acquisition Corporation, a Nevada
corporation and A
wholly-owned subsidiary of Parent ("MERGER SUB"), and Electronic
Clearing House,
Inc., a Nevada corporation (the "COMPANY").
RECITALS
WHEREAS, the Boards of Directors of Parent, Merger Sub and the Company
have each determined that it is in the best
interests of their respective
stockholders for Parent to acquire the Company upon the terms and
subject to the
conditions set forth herein.
WHEREAS, the Board of
Directors of the Company (the "BOARD") has
unanimously (i) determined that the Merger (as defined in SECTION
1.1 hereof) is
advisable and fair to,
and in the
best interests of, the Company and its
stockholders, and (ii)
approved this Agreement, the Merger and the other
transactions
contemplated by this
Agreement (the
"TRANSACTIONS"),
and (iii)
resolved, subject to
the terms and conditions of this Agreement, to recommend
the approval of this Agreement by the stockholders of the
Company.
WHEREAS, concurrently
with the execution of this Agreement, as a
condition and material
inducement to Parent's
willingness
to enter into this
Agreement, all
executive officers and directors of the Company and all of
their
respective affiliates,
in their capacity as
stockholders of the
Company, are
entering into voting
agreements in
substantially the form
attached hereto as
EXHIBIT A (the
"COMPANY VOTING AGREEMENTS"), pursuant to which each such
stockholder has agreed, among other things, to vote his, her or its Shares
(as
defined in SECTION 1.6(A) hereof) in favor of the Merger.
WHEREAS, concurrently
with the execution of this Agreement, as a
condition and material
inducement to Parent's
willingness
to enter into this
Agreement, (i) the individuals listed on SCHEDULE I attached hereto
are entering
into non-competition agreements with Parent (the "NON-COMPETITION
AGREEMENTS"),
and (ii) the
individuals listed
on SCHEDULE II attached hereto (the "KEY
EMPLOYEES") are entering into offer letters with Parent.
NOW, THEREFORE,
in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable
consideration,
the receipt and sufficiency of which are hereby acknowledged,
the parties agree
as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER.
At the Effective Time (as defined in SECTION 1.2
hereof) and subject to and upon the terms and conditions of this Agreement and
the applicable
provisions of the Nevada Revised Statutes ("NEVADA LAW"),
Merger
Sub shall be merged
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with and into the Company (the "MERGER"), the separate corporate existence of
Merger Sub
shall cease and the Company shall continue as the surviving
corporation. The
Company, as the
surviving corporation
after the Merger,
is
hereinafter sometimes referred to as the "SURVIVING
CORPORATION."
1.2 EFFECTIVE
TIME; CLOSING. Upon the terms and subject to the
conditions of this
Agreement, the parties
hereto shall cause the
Merger to be
consummated by filing
articles of merger
(the "ARTICLES OF
MERGER") with the
Secretary of State of
the State of
Nevada in accordance with the relevant
provisions of Nevada
Law (the time of such filing (or such later time as may be
agreed in writing by the Company and Parent and specified in the Articles of
Merger) being
the "EFFECTIVE TIME") as soon as practicable on or after the
Closing Date (as herein defined). Unless the context otherwise requires, the
term "AGREEMENT" as
used herein refers
collectively to this Agreement and Plan
of Merger (as the same may be amended from time to time in
accordance
with the
terms hereof)
and the Articles of Merger. The closing of the Merger (the
"CLOSING") shall take place at the offices of O'Melveny & Myers
LLP, Embarcadero
Center West, 275 Battery Street, Suite 2600, San Francisco,
California,
at a
time and date to be
specified by the
parties hereto,
which shall be no
later
than the second business day after the satisfaction or waiver of the
conditions
set forth in ARTICLE VI hereof (other than those conditions, which by their
terms, are to be
satisfied or waived on the Closing
Date), or at such other
time, date and
location as the parties hereto agree in writing (the "CLOSING
DATE").
1.3 EFFECT OF THE
MERGER. At the
Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable provisions of
Nevada Law. Without
limiting the generality of the foregoing, and subject
thereto, at
the Effective Time all of the assets, properties, rights,
privileges, powers and
franchises
of the Company and
Merger Sub shall vest in
the Surviving
Corporation,
and all of the
debts, liabilities, obligations,
restrictions and
duties of the Company
and Merger Sub shall
become the debts,
liabilities, obligations, restrictions and duties of the Surviving
Corporation.
1.4 ARTICLES OF INCORPORATION AND BYLAWS OF SURVIVING
CORPORATION.
(a) ARTICLES OF
INCORPORATION. As of
the Effective Time,
by
virtue of the Merger and without any action on the part of Merger
Sub
or the Company, the Articles of Incorporation of the Surviving
Corporation shall
be amended and restated to read the same as the
Articles of Incorporation of Merger Sub, as in effect immediately
prior
to the Effective Time,
until thereafter amended in accordance with
Nevada Law and such Articles of Incorporation; PROVIDED, HOWEVER, that
as of the Effective
Time the Articles of
Incorporation shall
provide
that the name of the
Surviving Corporation
is "Electronic Clearing
House, Inc."
(b)
BYLAWS. As of the
Effective Time, by virtue of the Merger
and without any action
on the part of Merger Sub or the Company, the
Bylaws of the
Surviving Corporation
shall be amended and
restated to
read the same as the
Bylaws of Merger Sub,
as in effect
immediately
prior to the Effective
Time, until
thereafter
amended in
accordance
with Nevada
Law, the Articles of Incorporation of the Surviving
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Corporation and such Bylaws; PROVIDED, HOWEVER, that all references
in
such Bylaws
to Merger Sub shall be deemed to refer to "Electronic
Clearing House, Inc."
1.5 DIRECTORS AND OFFICERS OF SURVIVING CORPORATION.
(a) DIRECTORS.
The initial directors of the Surviving
Corporation shall be
the directors
of Merger Sub as of immediately
prior to the Effective Time, until their respective successors are
duly
elected or appointed and qualified.
(b) OFFICERS.
The initial officers of the Surviving
Corporation shall be the officers of Merger Sub as of immediately
prior
to the Effective
Time, until their respective successors are duly
elected or appointed and qualified.
1.6 EFFECT
ON CAPITAL STOCK. Upon the terms and subject to the
conditions of this Agreement, at the Effective Time, by virtue of
the Merger and
without any action on the part of Merger Sub, the Company or the holders of
any
of the following securities, the following shall occur:
(a) CONVERSION OF
SHARES. Each share of
Company Common Stock
(as defined in Section 2.3(a) hereof), including the associated
right
(the "RIGHTS")
to purchase one
one-hundredth
of a share of Series
A
Junior Participating
Preferred Stock
("SERIES A PREFERRED STOCK"), or
in certain
circumstances Company Common Stock, pursuant to the Amended
and Restated Rights Agreement dated as of January 29, 2003 (the
"RIGHTS
AGREEMENT"), by and between the Company and OTR, Inc., as Rights
Agent,
(the "SHARES")
issued and outstanding immediately prior to the
Effective Time
(other than any Shares to be canceled pursuant to
SECTION 1.6(B) hereof and any Dissenting Shares (as defined in SECTION
1.7 hereof)),
will be canceled
and extinguished and automatically
converted into the right to receive, upon surrender of the
certificate
representing such
Share in the manner
provided in SECTION
1.8 hereof
(or in the case of a
lost, stolen or destroyed certificate, upon
delivery of an affidavit (and bond, if required) in the manner
provided
in SECTION 1.10 hereof), cash, without interest, in an
amount equal to
Eighteen Dollars and Seventy Five Cents ($18.75) per Share (the
"MERGER
CONSIDERATION").
(b) CANCELLATION OF
TREASURY AND
PARENT-OWNED SHARES.
Each
Share held by the Company or owned by Merger Sub, Parent or any direct
or indirect
wholly-owned
subsidiary
of the Company or of Parent
immediately
prior to the Effective Time shall be canceled and
extinguished without any conversion thereof.
(c) CAPITAL STOCK OF
MERGER SUB. Each share
of common stock,
par value $0.01 per
share, of Merger Sub (the "MERGER SUB COMMON
STOCK") issued and outstanding immediately prior to the Effective
Time
shall be converted into one validly issued, fully paid and
nonassessable share of
common stock, par value $0.01 per share, of the
Surviving Corporation.
Each certificate evidencing ownership of shares
of Merger
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Sub Common Stock
outstanding
immediately prior to
the Effective Time
shall evidence
ownership of such shares of capital stock of the
Surviving Corporation.
(d) EQUITY AWARDS. The
Company shall, prior
to the Effective
Time, take such
action, adopt such amendments, and obtain all such
consents, as shall be required: (i) as to any Company Stock Options
(as
defined in Section
2.3(a)), shares of
Company Restricted Stock (as
defined in Section 2.3(a)) (including those shares issued pursuant
to
the acceleration of Long-Term
Incentive Restricted Stock Grants (as
defined in
Section 2.3(a)) as a result of this Section 1.6(d)),
Long-Term Incentive
Restricted
Stock Grants and
Long-Term
Incentive
Phantom Stock
Grants (as defined in Section 2.3(a)) that are
outstanding and
unvested immediately
prior to the Effective
Time, to
cause such Company Stock Options, shares of Company Restricted Stock,
Long-Term Incentive
Restricted
Stock Grants and
Long-Term
Incentive
Phantom Stock
Grants to be fully vested immediately prior to the
Effective Time; (ii)
as to any Long-Term
Incentive Restricted
Stock
Grants that are
accelerated as a
result of this Section
1.6(d), to
issue shares of Company Restricted Stock in respect thereof upon
such
acceleration; (iii)
as to any shares of Company Restricted Stock
(including those
issued pursuant to the acceleration of Long-Term
Incentive Restricted
Stock Grants as a result of this Section 1.6(d)),
to cause such shares to be treated in accordance with Section
1.6(a) at
the Effective
Time; and (iv) to cancel, immediately prior to the
Effective Time,
all then-outstanding
Company
Stock Options and
Long-Term Incentive
Phantom Stock Grants such that the holder
of any
such Company Stock
Option or Long-Term
Incentive Phantom
Stock Grant
shall
have no further interest in such Company Stock Option or
Long-Term Incentive
Phantom Stock Grants,
or right in respect thereof
or with respect
thereto, other than the right to
receive such cash
consideration as determined pursuant to the next three sentences.
With
respect to each
Company Stock
Option that has a per share exercise
price that is less than the Merger Consideration and is so cancelled,
the holder of such
Company Stock
Option shall be
entitled to receive
for such Company Stock Option (the "OPTION CONSIDERATION")
(subject to
any applicable
withholding
tax) cash equal to the
product of (A) the
number of shares of Company Common Stock as to which the portion of
the
Company Stock
Option that is so cancelled could be exercised,
multiplied by (B) the Merger Consideration less the per share
exercise
price of such portion
of the Company Stock
Option. In the case of a
Company Stock
Option having a per share exercise price equal to or
greater than the Merger Consideration, such Company Stock Option
shall
be cancelled
without the payment of cash or issuance of other
securities in respect thereof. With respect to each Long-Term
Incentive
Phantom Stock Grant,
the holder of such
Long-Term Incentive
Phantom
Stock Grant shall be entitled to receive for such Long-Term Incentive
Phantom Stock Grant (the "PHANTOM STOCK CONSIDERATION") (subject to
any
applicable withholding tax) cash equal to the product of (A) the
number
of shares of phantom stock subject to such Long-Term Incentive Phantom
Stock Grant,
multiplied by (B) the
Merger Consideration.
As soon as
reasonably practicable
after the Effective
Time, Parent shall deliver
to the Surviving Corporation an amount equal to the sum of the
aggregate Option
Consideration
and the aggregate Phantom Stock
Consideration payable to holders of Company Stock Options and
Long-Term
Incentive Phantom
Stock Grants that were
converted into the
right to
receive Option
Consideration and Phantom Stock Consideration pursuant
to this SECTION 1.6(D), and the Surviving Corporation shall promptly
deliver the Option
Consideration
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and Phantom
Stock Consideration to such holders of Company Stock
Options and Long-Term Incentive Phantom Stock Grants.
1.7 DISSENTING SHARES.
(a) Notwithstanding
any provision of this Agreement to the
contrary, any
shares of Company Common Stock that are issued and
outstanding
immediately prior to
the Effective Time and that are held
by a stockholder of the Company who has properly exercised his, her or
its dissenter's rights under Nevada Law (the "DISSENTING SHARES")
shall
not be converted
into the right to
receive the Merger
Consideration
pursuant to
SECTION 1.6(A), but, instead, such shares shall be
converted into
the right to receive such consideration as may be
determined to be due with respect to such Dissenting Shares
pursuant to
and subject to the requirements of Nevada Law. If any such holder
shall
have failed to perfect, or shall have effectively withdrawn or lost,
his, her or its right to dissent from the Merger under Nevada Law,
each
share of such holder's
Company Common Stock shall thereupon be deemed
to have been
converted, as of the
Effective Time,
into the right to
receive the Merger
Consideration, without
any interest thereon,
upon
surrender, in the
manner provided in SECTION 1.8 hereof, of the
certificate or certificates that formerly evidenced such Shares.
The
Company shall give
Parent (i) prompt
notice of any notice
or demands
for appraisal or payment for shares of Company Common Stock
received by
the Company, and (ii)
the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal under Nevada Law.
The
Company shall not,
except with the prior
written consent of Parent,
make any payment with respect to any demands for appraisal or offer to
settle or settle any such demands.
1.8 SURRENDER OF CERTIFICATES.
(a) PAYING AGENT.
Prior to the Effective
Time, Parent shall
select a bank or trust company reasonably acceptable to the Company to
act as agent (the "PAYING AGENT") for the holders of Shares
to receive
the funds to which holders of Shares shall become entitled
pursuant to
SECTION 1.6(A). As
soon as reasonably
practicable after the Effective
Time, Parent shall
deposit, or cause
Merger Sub to deposit,
with the
Paying Agent,
for the benefit of the holders of Shares, cash in an
amount sufficient
to pay the aggregate Merger Consideration. The
deposit made by Parent
or Merger Sub, as the case may be, pursuant to
this SECTION 1.8(A) is hereinafter referred to as the "EXCHANGE
FUND."
If such funds are
insufficient to make
the payments
contemplated by
SECTION 1.6(A),
Parent
shall promptly deposit, or cause to be
deposited, additional
funds with the Paying Agent in an amount that is
equal to the
deficiency in the
amount funds required to make such
payment. Parent shall
instruct the Paying
Agent to cause the Exchange
Fund to be (i) held for the benefit of the holders of the Shares,
and
(ii) applied
promptly to make the
payments provided for in SECTION
1.6(A) in accordance
with this SECTION 1.8. The Exchange Fund shall be
invested by the Paying Agent as directed by Parent.
(b) PAYMENT
PROCEDURES.
As soon as
reasonably
practicable
after the Effective
Time, Parent shall
cause the Paying Agent to mail
to each holder of record (as
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of the Effective Time) of a certificate or certificates (the
"CERTIFICATES"),
which
immediately prior
to the Effective Time
represented the outstanding Shares converted into the right to
receive
the Merger Consideration, (i) a letter of transmittal in customary
form
(which shall specify that delivery shall be effected, and risk of loss
and title to the
Certificates shall
pass, only upon
delivery of the
Certificates (or
affidavits
of loss in lieu
thereof and any required
bond in accordance
with SECTION 1.10) to the Paying Agent and
shall
contain such
other provisions as Parent or the Paying Agent may
reasonably specify)
and (ii) instructions
for use in
effecting the
surrender of the Certificates in exchange for the Merger
Consideration
(which instructions
shall include provisions for payment of the Merger
Consideration to a
person other
than the person in whose name the
surrendered
Certificate is
registered
on the transfer
books of the
Company, subject to receipt of appropriate documentation and
payment of
any applicable taxes).
Upon surrender of Certificates for cancellation
(or affidavits of loss in lieu thereof together with any required
bond
in accordance
with SECTION 1.10) 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, the holders of such
Certificates formerly
representing
the Shares
shall be entitled to
receive in
exchange therefor the Merger Consideration, and the
Certificates so
surrendered
shall forthwith be canceled. Until so
surrendered,
outstanding
Certificates shall be
deemed from and after
the Effective Time,
for all corporate
purposes, to evidence
only the
right to receive the Merger Consideration. Promptly following
surrender
of any such Certificates, the Paying Agent shall deliver to
the record
holders thereof, without interest, the Merger Consideration.
(c) PAYMENTS
WITH RESPECT TO UNSURRENDERED SHARES; NO
LIABILITY. At any time
following the one (1)
year anniversary of
the
Effective Time, the Surviving Corporation shall be entitled to
require
the Paying Agent to deliver to it any portion of the Exchange Fund
that
remains unclaimed
by the holders of Shares (including, without
limitation, all
interest and other income received by the Paying Agent
in respect of all funds made available to it), and,
thereafter,
such
holders shall be entitled to look to the Surviving Corporation
(subject
to abandoned property,
escheat and other similar laws) only as general
creditors thereof with respect to any Merger Consideration that may be
payable upon
due surrender of the Certificates held by them.
Notwithstanding
the foregoing,
neither
Parent,
the Surviving
Corporation nor the
Paying Agent shall be liable to any holder of
a
Share for any Merger
Consideration
delivered in respect of such Share
to a public official
pursuant to any
abandoned property,
escheat or
other similar law.
(d) TRANSFERS
OF OWNERSHIP. If the payment of the Merger
Consideration is to be
paid to a person other than the person in whose
name the Certificates
surrendered in exchange therefor are registered,
it will be a condition of payment that the Certificates so surrendered
be properly
endorsed and otherwise in proper form for transfer
(including without
limitation,
if requested by Parent or the
Paying
Agent, a medallion
guarantee), and that
the persons requesting
such
payment will have paid
to Parent or any agent designated by it any
transfer or other taxes required by reason of the payment of the
Merger
Consideration to a
person other
than the registered holder of the
Certificates surrendered, or established to the reasonable
satisfaction
of Parent or any agent
designated by it that such tax has been paid or
is not applicable.
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(e) REQUIRED WITHHOLDING. Each of the Paying Agent, Parent and
the Surviving Corporation shall be entitled to deduct and withhold
from
any consideration
payable or otherwise
deliverable
pursuant to this
Agreement to any
holder or former
holder of Shares or
Company Stock
Options such
amounts as may be
required to be deducted or withheld
therefrom under the
Code (as defined
in SECTION
2.11(A) hereof) or
under any provision
of state, local or foreign tax law or under any
other applicable
Legal Requirement (as defined in SECTION 2.3(A)
hereof). To the extent
such amounts are so deducted or withheld, such
amounts shall be
treated for all
purposes under this Agreement as
having been paid to
the person to whom such amounts would otherwise
have been paid (in
respect of which
Parent, the Paying
Agent or the
Surviving Company,
as the case may be, made such deductions and
withholdings).
(f) ADJUSTMENTS.
If during the period
from the date of
this
Agreement through the
Effective Time,
any change in the
outstanding
shares of Company
Common Stock or the
shares of Company
Common Stock
issuable upon
conversion,
exercise
or exchange of securities
convertible,
exercisable or exchangeable into or for shares of Company
Common Stock,
shall
occur by reason of any reclassification,
recapitalization,
stock split or combination, exchange or readjustment
of shares of Company Common Stock, or any similar transaction, or any
stock dividend
thereon with a record date during
such period, the
Merger Consideration
shall be appropriately
adjusted to reflect
such
change.
1.9 NO FURTHER
OWNERSHIP RIGHTS IN SHARES. Payment of the Merger
Consideration shall be
deemed to have been
paid in full
satisfaction
of all
rights pertaining to the Shares, and there shall be no further
registration of
transfers on the records of the Surviving Corporation of the Shares which were
outstanding
immediately prior to
the Effective Time.
If, after the
Effective
Time, Certificates
are presented to the
Surviving Corporation
for any reason,
they shall be canceled and exchanged as provided in this ARTICLE
I.
1.10 LOST,
STOLEN OR DESTROYED CERTIFICATES. In the event that any
Certificates shall
have been lost, stolen or destroyed, the Paying Agent shall
pay in exchange for such lost, stolen or destroyed Certificates,
upon the making
of an affidavit of
that fact by the holder thereof, the Merger Consideration
payable with
respect thereto; PROVIDED, HOWEVER, that Parent may, in its
discretion and
as a condition precedent to the payment of such Merger
Consideration, require
the owner of such lost, stolen or destroyed Certificates
to deliver a bond in such reasonable and customary amount as it may direct as
indemnity against
any claim that may be
made against
Parent, the Surviving
Corporation or the Paying Agent with respect to the Certificates
alleged to have
been lost, stolen or destroyed.
1.11 TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time
after
the Effective Time,
any further
action is necessary or
desirable to carry out
the purposes of this Agreement and to vest the Surviving
Corporation
with full
right, title and possession to all assets, property, rights,
privileges, powers
and franchises of the
Company and Merger Sub, the officers and directors of the
Company and
Merger Sub will take all such
lawful and reasonably necessary
action.
7
<PAGE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY
The Company hereby
represents
and warrants to Parent
and Merger Sub,
subject only to
exceptions
disclosed in writing in the disclosure schedule
supplied by the Company to Parent dated as of the date hereof and
certified by a
duly authorized officer of the Company (the "COMPANY SCHEDULE"), as
follows:
2.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Each of the Company and its subsidiaries is a corporation
duly organized, validly existing and in good standing under the
laws of
the jurisdiction of its incorporation and has the requisite corporate
power and authority to own, lease and operate its assets and
properties
and to carry
on its business as it is now being conducted and as
proposed by the
Company to be
conducted. Each of the
Company and its
subsidiaries is
in possession of all franchises, grants,
authorizations,
licenses, permits, easements, consents, certificates,
approvals and orders ("APPROVALS") necessary to own, lease and
operate
the properties it purports to own, operate or lease and to carry on
its
business as it is now being conducted and as proposed by the
Company to
be conducted. except
where any failure to possess such Approvals would
not, individually or
in the aggregate, be
reasonably likely to have a
Material Adverse Effect.
(b) The Company has no subsidiaries except for the
corporations
identified in SECTION
2.1(B) of the
Company Schedule.
SECTION 2.1(B) of the Company Schedule also (i) sets forth the
form of
ownership and
percentage
interest of the Company in each of its
subsidiaries, (ii) to the extent that a subsidiary set forth
thereon is
not wholly
owned by the Company,
lists the other
persons or
entities
who have an interest in such subsidiary and sets forth the percentage
of each such interest,
and (iii) identifies
each of the directors and
officers of each such
subsidiary.
Neither the Company
nor any of its
subsidiaries has
agreed to make nor is
obligated to make nor is bound
by any written, oral or other agreement, contract, subcontract, lease,
mortgage, indenture,
understanding,
arrangement,
instrument,
note,
bond, option, warranty, purchase order, license, sublicense,
insurance
policy, benefit plan, permit, franchise or other instrument,
obligation
or commitment or undertaking of any nature (a "CONTRACT"), in
effect as
of the date hereof or as may hereafter be in effect under which
it may
become obligated
to make, any future investment in or capital
contribution to any
other entity.
Neither the Company
nor any of its
subsidiaries directly or indirectly owns any equity or similar
interest
in or any interest
convertible,
exchangeable or exercisable for, any
equity or similar
interest in, any corporation, partnership, limited
liability company,
joint venture or other
business, association or
entity.
(c) The Company and each of its subsidiaries is duly qualified
to do business as a foreign corporation, and is in good standing,
under
the laws of all
jurisdictions where
the character of the
properties
owned, leased or
operated by it or the nature of its activities makes
such qualification necessary, except where failures to be so
qualified
and in good standing would not, individually or in the aggregate, be
reasonably likely to have a Material Adverse Effect on the
Company.
8
<PAGE>
2.2 ARTICLES OF
INCORPORATION AND
BYLAWS. The Company
has previously
furnished to
Parent (i) a complete and correct copy of its Articles of
Incorporation and
Bylaws as amended to date (together, the "COMPANY CHARTER
DOCUMENTS") and (ii) the equivalent organizational documents for
each subsidiary
of the Company, each
as amended to date. The Company is not in violation of any
of the provisions of
the Company Charter
Documents,
and no subsidiary of
the
Company is in violation of its equivalent organizational
documents.
2.3 CAPITALIZATION.
(a) The authorized
capital stock of the
Company consists
of
36,000,000 shares of
Company common stock,
par value $0.01 per
share
("COMPANY COMMON
STOCK") and 5,000,000
shares of Preferred Stock, par
value of $0.01 per share ("COMPANY PREFERRED STOCK"), of which
500,000
shares have been designated as Series A Junior Participating
Preferred
Stock. At the
close of business on the date of this Agreement (i)
6,824,814 shares of
Company Common Stock
were issued and
outstanding
(not including
38,269 shares of Company Common Stock held by the
Company as treasury stock), all of which are validly issued, fully
paid
and nonassessable, of which 137,602 shares were Company Restricted
Stock (of which (x)
108,088 shares of
Company Restricted
Stock were
granted under the 2003 Option Plan (as defined below), (y) no
shares of
Company Restricted
Stock were granted
under the 1992 Option
Plan (as
defined below), and
(z) 29,514 shares of Company Restricted Stock were
granted outside of the Company Option Plans (as defined
below)); (ii)
no shares of Company
Common Stock were held by subsidiaries of the
Company; (iii) 709,200 shares of Company Common Stock were reserved
for
issuance upon the exercise of outstanding options to purchase Company
Common Stock under the Company's 2003 Incentive Stock Option Plan (the
"2003 OPTION
Plan"), 95,000 shares of Company Common Stock were
reserved for
issuance pursuant to outstanding incentive grants of
future restricted
stock awards (the
"LONG-TERM INCENTIVE
RESTRICTED
STOCK GRANTS")
under the 2003 Option
Plan, 10,000
shares of phantom
stock were reserved for issuance pursuant to outstanding
cash-settled
incentive phantom stock grants (the "LONG-TERM INCENTIVE PHANTOM STOCK
GRANTS") under the
2003 Option Plan,
and 227,912 shares of Company
Common Stock were
reserved for future
issuance pursuant to the 2003
Option Plan; (iv)
239,325 shares of Company Common Stock were reserved
for
issuance upon the exercise of outstanding options to purchase
Company Common
Stock under the Company's 1992 Officers and Key
Employees Incentive
Stock Option Plan (the "1992
OPTION PLAN," and
together with the 2003 Option Plan, the "COMPANY OPTION PLANS"), no
shares of Company
Common Stock were reserved for issuance pursuant to
outstanding Long-Term
Incentive Restricted Stock Grants under the 1992
Option Plan,
no shares of phantom
stock were
reserved for issuance
pursuant to Long-Term
Incentive Phantom Stock Grants under the 1992
Option Plan, and no
shares of Company
Common Stock were
reserved for
future issuance
pursuant to the 1992 Option Plan, (v) no shares of
Company Common Stock
were reserved for
issuance upon the
exercise of
outstanding options to purchase Company Common Stock granted
outside of
the Company Option Plans, and (vi) no shares of Company Preferred
Stock
were issued and outstanding. No Long-Term Incentive Restricted Stock
Grants or Long-Term Incentive Phantom Stock Grants have been
granted by
the Company other than under the Company Option Plans. SECTION 2.3(A)
of
9
<PAGE>
the Company Schedule sets forth the following information with respect
to each Company stock option ("COMPANY STOCK OPTIONS"), each share of
Company Common
Stock that is restricted, unvested or subject to a
repurchase option or
other risk of
forfeiture
("COMPANY RESTRICTED
STOCK") and
each Long-Term Incentive Restricted Stock Grant and
Long-Term Incentive
Phantom Stock Grant (collectively, "INCENTIVE
GRANTS," and
collectively with the
Company Stock Options
and Company
Restricted Stock,
"EQUITY AWARDS")
outstanding as of the date of this
Agreement: (i) the
name and address of the Equity Award Holder; (ii)
the particular
Company Option Plan, if any, pursuant to which such
Equity Award was granted; (iii) the number of shares of
Company Common
Stock subject to such Equity Award; (iv) for each Equity Award that
is
a Company Stock
Option, the exercise price of each Company Stock
Option; (v) the date
on which such Equity Award was granted; (vi) the
date on which such
Equity Award
expires; and (vii) for each Equity
Award that is a Company Stock Option, whether such Company Stock
Option
is intended to qualify as an incentive stock option within the
meaning
of Section 422 of the Code. All Company Stock Options (including those
that have been exercised, terminated, expired, forfeited or
otherwise
cancelled) were issued
at a strike price at least equal to fair market
value such that the
fair market
value on the grant
date equaled or
exceeded the fair market value on the financial measurement date for
each such Company
Stock Option or, with respect to Company Stock
Options that were not issued in such a manner, the Company recorded an
appropriate compensation charge in its financial statements
relating to
such grants
in the appropriate period and reported such in its
financial statements
and Returns during the required period. The
Company has made
available to Parent
accurate and complete
copies of
all forms of
agreements pursuant to
which outstanding
Equity Awards
have been issued.
All shares of Company Common Stock subject to
issuance upon
exercise of or otherwise issuable under such Equity
Awards, when
issued on the terms and conditions specified in the
instrument
pursuant to
which they are issuable, will be duly
authorized, validly issued, fully paid and nonassessable.
There are no
commitments or
agreements
of any character to which the Company is
bound obligating
the Company to
accelerate the vesting
of any Equity
Award as a result
of the Transactions. All outstanding shares of
Company Common Stock,
all outstanding Company Equity Awards and all
outstanding shares of
capital stock of each
subsidiary of the Company
have been issued
and granted in material compliance with (i) all
applicable Legal
Requirements, and (ii)
all requirements set forth in
applicable Contracts.
For the purposes of this Agreement, "LEGAL
REQUIREMENTS" means any federal, state, local, municipal, foreign or
other law, statute, legislation, constitution, principle of common
law,
resolution, ordinance,
code, edict, order,
judgment, decree, rule,
regulation,
ruling or
requirement
issues,
enacted,
adopted,
promulgated,
implemented or
otherwise put into effect by or under the
authority of any
Governmental
Entity (as
defined in SECTION
2.5(B)
hereof). There are no
declared or accrued
but unpaid dividends
with
respect to any shares of Company Common Stock.
(b) The Company
owns free and clear of
all liens,
pledges,
hypothecations,
charges, mortgages, security interests, encumbrances,
claims, interferences,
options, rights of
first refusals,
preemptive
rights, community
property interests or restrictions of any nature
(including any
restriction
on the voting of any security, any
restriction on the
transfer of any security or other asset, any
restriction on the
possession,
exercise or transfer of any other
attribute of ownership of any asset)
10
<PAGE>
("LIENS"), other than
restrictions on
transfer imposed by federal and
state securities
laws, directly or indirectly through one or more
wholly owned subsidiaries, all issued and outstanding shares of
capital
stock, partnership
interests or similar ownership interests of any
subsidiary of the Company, and all issued and outstanding securities
convertible into, or
exercisable or
exchangeable for, such
shares of
capital stock,
partnership interests
or similar ownership
interests.
Except as set forth in SECTION 2.3(A) hereof, there are no
subscriptions,
options, warrants, shares of capital stock, partnership
interests or similar
ownership interests,
calls, rights (including
preemptive rights), commitments or agreements of any character to
which
the Company
or any of its
subsidiaries
is a party or by
which the
Company or any of its
subsidiaries is bound
obligating the Company or
any of its
subsidiaries to
issue, deliver or sell, or cause to be
issued, delivered or sold, or repurchase, redeem or otherwise acquire,
or cause the
repurchase, redemption
or acquisition of, any
shares of
capital stock,
partnership interests or similar ownership interests of
the Company or any of its subsidiaries or obligating the Company or
any
of its subsidiaries
to grant, extend, accelerate the vesting of or
enter into
any such subscription, option, warrant, call, right,
commitment or agreement. There are no outstanding or
authorized stock
appreciation, phantom
stock, profit
participation,
or other similar
rights with respect to
the Company or any of its subsidiaries. There
are no registration
rights in respect of
any shares of Company Common
Stock, and
except for the
Company Voting Agreements, there are no
voting trusts,
proxies, rights plans, antitakeover plans or other
agreements or
understandings
to which the Company or any of its
subsidiaries is a
party or by which the Company or any of its
subsidiaries is bound with respect to any class of capital stock of
the
Company or with
respect to any class
of capital
stock, partnership
interest or similar ownership interest of any of its
subsidiaries.
2.4 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,
on the terms and
subject to the
conditions hereof (including, without limitation, with respect to the Merger,
the approval
of this Agreement by holders of a majority
of the outstanding
Shares in accordance
with Nevada Law),
the Transactions. The execution and
delivery of this Agreement by the Company and the consummation by
the Company of
the Transactions
have been duly and validly authorized by all necessary
corporate action on
the part of the Company and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or to
consummate the
Transactions
(other than (x) with
respect to the Merger,
the
approval of this Agreement by holders of a majority of the
outstanding Shares in
accordance with
Nevada Law, and (y) the filing of the
Articles of Merger
as
required by Nevada Law). 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, constitute legal and binding
obligations of
the Company,
enforceable
against the Company in accordance with its terms,
subject to applicable
bankruptcy,
insolvency,
moratorium,
reorganization and
similar laws affecting
creditors'
rights generally and to general
equitable
principles.
11
<PAGE>
2.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by the
Company does not, and the performance of this Agreement by
the Company
will not, (i) conflict with or violate the Company Charter
Documents or
the equivalent
organizational
documents of any of the Company's
subsidiaries, (ii)
subject, (x) with respect to the Merger,
to the
approval of this Agreement by holders of a majority of the
outstanding
Shares in accordance
with Nevada Law and
(y) to compliance
with the
requirements set forth
in SECTION
2.5(B) hereof, conflict with or
violate in any material respect any Legal Requirements applicable to
the Company or any of its subsidiaries or by which its or
any of their
respective properties
is bound or affected,
or (iii) conflict with or
violate, or result in
any breach of or
constitute
a default (or an
event that with notice or lapse of time or both would become a
default)
under, or alter the
rights or obligations of any third party under, or
give to others any rights of termination, amendment, acceleration or
cancellation of,
or result in the creation of a Lien on any of the
properties
or assets of the Company or any of its subsidiaries pursuant
to, any Company Contract to which the Company or any of its
subsidiaries is a
party or by which the Company or any of its
subsidiaries or its or any of their respective properties are bound or
affected, except
to the extent such conflict, violation, breach,
default, impairment
or other effect would not in the case of
clauses
(ii) or (iii),
individually or in the aggregate, be reasonably likely
to (A) be material
to the Company and its subsidiaries taken as a
whole, or,
following the Effective Time, Parent or the Surviving
Corporation, or (B)
have a material
adverse effect on the
ability of
the Company
to perform its obligations under this Agreement or
consummate the Transactions without any material delay.
(b) The execution and delivery of this Agreement by the
Company does not, and the performance of this Agreement by
the Company
shall not, require any consent, approval, authorization or permit of,
or filing with or notification to, any federal, state or foreign
court,
administrative agency, commission, governmental or regulatory
authority
of competent
jurisdiction,
or any non-governmental self-regulatory
agency, commission or
authority having (through authority granted by a
governmental
agency or commission) the force of law (each, a
"GOVERNMENTAL
ENTITY"), except
in each case (i) for applicable
requirements, if any,
of the Securities Exchange Act of 1934, as
amended (the "EXCHANGE
ACT"), state securities Legal Requirements
("BLUE SKY LAWS") and state takeover laws, applicable requirements,
if
any, of the
Hart-Scott-Rodino
Antitrust Improvements
Act of 1976, as
amended (the
"HSR
ACT"),
applicable
pre-merger
notification
requirements of
foreign Governmental Entities, the rules and
regulations of the Nasdaq Capital Market (the "NASDAQ"), and the
filing
and recordation
of the Articles of Merger as required by
Nevada Law,
and (ii) 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, be reasonably likely to
(A) be material to the
Company and its
subsidiaries taken as
a whole
or, following the Effective Time, Parent or the Surviving
Corporation,
or (B) have a material
adverse effect on the ability of the Company to
perform its
obligations
under
this Agreement or consummate the
Transactions without any material delay.
12
<PAGE>
2.6 COMPLIANCE.
(a) Neither the
Company nor any of its subsidiaries is in
conflict with, or in
default or violation
of, any Legal
Requirements
applicable to the Company or any of its subsidiaries or by which
its or
any of their respective properties is bound or affected, except for
any
conflicts, defaults or
violations that would
not, individually or
in
the aggregate, be
reasonably likely to
be material to the Company and
its subsidiaries taken as a whole.
(b) The Company's and its subsidiaries' material Approvals are
in full force and effect, and the Company and its
subsidiaries are
in
compliance in all
material respects with the terms of each of such
material Company Approval.
(c) The use by any Person of any Company Product (as defined
in Section 2.18(b)) as
such Company Product is intended by the Company
to be used will not cause such Person to be in conflict with, or in
default or violation
of, any Legal
Requirements, PCI
Standards (as
defined in SECTION
2.29(A)), CISP
Requirements (as defined in SECTION
2.29(A)) or NACHA Rules (as defined in SECTION 2.29(A)).
2.7 SEC FILINGS; FINANCIAL STATEMENTS; INTERNAL CONTROLS.
(a) Each report, schedule, form, registration statement, proxy
statement and other document filed or furnished by the Company with
the
Securities and
Exchange Commission
(the "SEC") since
January 1, 2004
(together with all information incorporated by reference therein,
the
"COMPANY SEC REPORTS"), which are all the reports,
schedules,
forms,
statements and
documents required to be filed or furnished by the
Company with the SEC since January 1, 2004 (including any Company SEC
Report filed
after the date of this
Agreement):
(i) was and will
be
prepared in all material respects in accordance with the
requirements
of the Securities Act of 1933, as amended (the "SECURITIES ACT"), the
Exchange Act and the
Sarbanes-Oxley
Act of 2002,
and the rules and
regulations
promulgated thereunder (the "SARBANES-OXLEY ACT"), in each
case, applicable to
such Company SEC Report as of its respective date,
as the case
may be, and (ii) did not and will not at
the time it was
filed (and if amended or superseded by a filing prior to the date of
this Agreement
then on the date of
such filing)
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
therein (in light of the circumstances under which they were made, in
the case of any such Company SEC Report filed under the Exchange
Act)
not misleading. None
of the Company's subsidiaries is required to file
any reports or other documents with the SEC.
(b)
Each set of consolidated financial statements
(including,
in each case, any related notes thereto) contained in the Company SEC
Reports (including any
Company SEC Report filed after the date of this
Agreement): (i)
complied and will comply as to form in all
material
respects with the
published rules and regulations of the SEC with
respect thereto in effect at the time of such filing; (ii) was and
will
be prepared
in accordance with United States generally accepted
accounting principles ("GAAP") applied on a consistent basis
throughout
the periods involved (except as may be indicated
13
<PAGE>
in the notes thereto or, in the case of unaudited statements, may not
contain footnotes as
permitted by Form 10-Q
of the Exchange Act)
and
each presents
fairly, in all material respects, the consolidated
financial position of the Company and its consolidated subsidiaries at
the respective
dates thereof and the consolidated results of its
operations and cash
flows for the periods
indicated, except that
the
unaudited interim
financial statements were or are subject to
normal
year-end adjustments
which were not or will
not be material in amount
or significance.
(c) The Company has previously furnished to Parent a complete
and correct copy of any amendments or modifications, which have not
yet
been filed
with the SEC but which are required to be filed or
furnished, to
agreements,
documents
or other instruments which
previously had been
filed by the Company
with the SEC pursuant to the
Securities Act or the Exchange Act.
(d) Except as set forth on the Company Schedule, the Company's
system of internal
controls over
financial reporting
are reasonably
sufficient in all material respects to provide reasonable assurance
(i)
that transactions
are recorded as
necessary to permit
preparation of
financial statements
in conformity with
GAAP, (ii) that
receipts and
expenditures are executed only in accordance with the authorization of
management, and (iii)
regarding prevention
or timely detection of the
unauthorized
acquisition, use or
disposition of the Company's assets
that could materially affect the Company's financial
statements.
(e) The Company's
"disclosure controls
and procedures"
(as
defined in Rules
13a-15(e) and
15d-15(e) of the Exchange Act) are
effective to provide
reasonable
assurance that (i) all information
(both financial
and non-financial) 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, regulations and forms of the SEC,
and (ii) all
such information
is accumulated and communicated to the Company's
management as appropriate to allow timely decisions regarding required
disclosure and to make the certifications of the principal executive
officer and principal
financial officer of
the Company required under
the Exchange Act with respect to such reports.
(f) The Company's
management
has disclosed to the
Company's
auditors and the audit
committee of the Board (i) any significant
deficiencies in the
design or operation of its internal controls over
financial reporting
that are reasonably likely to adversely affect the
Company's and its subsidiaries' ability to record, process, summarize
and report financial
information and has
identified for the Company's
auditors and audit
committee of the Board any material weaknesses in
internal control over financial reporting and (ii) any 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. The Company
has made available to
the Parent (i) a summary
of any such disclosure made by management to the Company's auditors
and
audit committee, and (ii) any material communication made by
management
or the Company's auditors to the audit committee required or
contemplated by
listing standards
of Nasdaq,
the audit committee's
charter or
professional standards
of the Public
14
<PAGE>
Company Accounting
Oversight Board. No material complaints from any
source regarding
accounting, internal
accounting controls or auditing
matters, and no
material concerns
from Company or
subsidiary of the
Company
employees regarding questionable accounting or auditing
matters, have been
received by the Company. The Company has made
available to the Parent a summary of all such material complaints or
concerns relating to other matters through the Company's
whistleblower
hot-line or equivalent system for receipt of employee or other
person's
concerns regarding
possible violations of Legal Requirements by the
Company or
any of its subsidiaries or any of their respective
employees. No
attorney representing the Company or any of its
subsidiaries, whether
or not employed by the Company or any of its
subsidiaries, has
reported evidence of a violation of securities laws,
breach of fiduciary
duty or similar
violation by the Company, any
subsidiary of the Company or any of its officers, directors,
employees
or agents to the Company's chief legal officer, audit committee (or
other committee
designated for the
purpose) of the Board or the Board
pursuant to
the rules adopted pursuant to Section 307 of the
Sarbanes-Oxley Act or any Company policy contemplating such reporting,
including in instances not required by those rules.
(g) The Company is in compliance in all material respects with
the applicable
provisions
of the Sarbanes-Oxley Act and with the
applicable listing and
other rules and
regulations of the
Nasdaq and
has not received any notice from the Nasdaq asserting any
non-compliance with
such rules and regulations. Each of the principal
executive officer of the Company and the principal financial
officer of
the Company
has made all
certifications
required by Rule 13a-14 or
15d-14 under
the Exchange Act and Sections 302 and 906 of the
Sarbanes-Oxley Act
with respect to the
Company SEC Reports,
and the
statements contained
in such certifications are accurate in all
material respects. For purposes of this Agreement, "principal
executive
officer" and
"principal
financial officer" shall have the meanings
given to such terms in the Sarbanes-Oxley Act. Neither the Company nor
any of its subsidiaries has outstanding, or has arranged any
outstanding,
"extensions of credit" to directors or executive officers
within the meaning of Section 402 of the Sarbanes-Oxley Act.
2.8 NO UNDISCLOSED
LIABILITIES.
Neither the Company nor any of its
subsidiaries has
any liability, indebtedness, obligation, expense, claim,
deficiency, guaranty
or endorsement
of any type (whether
absolute, accrued,
contingent or otherwise) (collectively, "LIABILITIES") which would be
material
to the business, results of operations or financial condition of
the Company and
its subsidiaries,
taken as a whole,
except (i)
Liabilities
reflected in the
Company's balance
sheet as of June
30, 2006 (including any related notes
thereto) (the "INTERIM BALANCE SHEET"), (ii) Liabilities incurred
since June 30,
2006 (the "INTERIM
BALANCE SHEET DATE") and prior to the date
hereof in the
ordinary course of
business, none of
which individually
(in the case of
this
clause (ii)) is material to the business, results of operations or financial
condition of the
Company and its subsidiaries, taken as a whole, or (iii)
Liabilities incurred
on or after the date of this Agreement in compliance with
SECTION 4.1 hereof.
2.9 ABSENCE OF CERTAIN
CHANGES OR EVENTS.
Since the Interim
Balance
Sheet Date (i) there has not been any Material Adverse Effect on the Company,
(ii) neither
the Company nor any of its subsidiaries has taken any of the
actions set forth in SECTIONS
15
<PAGE>
4.1(A) through 4.1(U),
and (iii) there has not been any damage, destruction or
other casualty
loss with respect to any tangible
asset or tangible
property
owned, leased or otherwise used by the Company or any of its
subsidiaries having
a value prior to such losses exceeding $100,000.
2.10 ABSENCE OF
LITIGATION.
There are no material
claims, actions,
suits or proceedings
pending or, to the
knowledge of the
Company,
threatened
(each, an "ACTION")
against the Company or any of its subsidiaries, or any of
their respective
properties
or assets or any of the executive officers or
directors of the
Company or any of its
subsidiaries, before
any Governmental
Entity or arbitrator, nor is there any reasonable basis therefor. No
investigation or
review by any Governmental Entity is pending or, to the
knowledge of
the Company, threatened against the Company or any of its
subsidiaries, or any
of their respective
properties
or assets or any of the
executive officers or
directors of the Company or any of its subsidiaries, nor
has any Governmental Entity indicated to the Company an intention
to conduct the
same. To the
knowledge of the
Company, since June
30, 2003, no
Governmental
Entity has at any time
challenged in writing or questioned in writing the legal
right of the Company
to conduct its
operations
as presently or previously
conducted. The Company
has provided to Parent true, correct and complete copies
of all complaints, pleadings, motions and other filings and written
correspondence
(including settlement
communications)
regarding any Actions,
investigations or
challenges
referred to in SECTION 2.10 of the Company
Schedule.
2.11 EMPLOYEE BENEFIT PLANS.(a) DEFINITIONS. With the exception of the
definition of
"AFFILIATE"
set forth in SECTION 2.11(A)(I) below (which
definition shall
apply only to this SECTION 2.11), for purposes of this
Agreement, the following terms shall have the meanings set forth
below:
(i) "AFFILIATE"
shall mean any other person or entity
under common control
with the Company
within the meaning
of
Section 414(b),
(c),
(m) or (o) of the Code and the
regulations issued thereunder;
(ii) "COBRA"
shall mean the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended;
(iii) "CODE" shall mean the Internal Revenue Code of
1986, as
amended;
(iv) "COMPANY
EMPLOYEE PLAN" shall mean any plan,
program, policy,
practice, contract, agreement or other
arrangement providing for employment, compensation, severance,
termination pay,
deferred compensation,
bonus, performance
awards, stock
or stock-related awards, fringe benefits,
disability
benefits,
supplemental
employment
benefits,
vacation benefits,
retirement
benefits,
profit-sharing,
post-retirement
benefits, or
other employee benefits or
remuneration of any
kind, whether
written or
unwritten or
otherwise, funded or
unfunded, including
without limitation,
each "employee
benefit plan," within the meaning of
Section
3(3) of ERISA which is or has been maintained, contributed to,
or required
to be contributed to, by the Company or any
Affiliate
16
<PAGE>
for the benefit of any Employee, or with respect to which the
Company has or may have any liability or obligation;
(v) "DOL" shall mean the Department of Labor;
(vi) "EMPLOYEE"
shall mean any current
or former or
retired employee, consultant or director of the Company or any
Affiliate;
(vii)
"EMPLOYMENT
AGREEMENT" shall
mean
each
management,
employment, severance,
termination,
consulting,
relocation, repatriation, expatriation, visas, work permit
or
other agreement, contract or understanding between the Company
or any Affiliate and any Employee;
(viii) "ERISA"
shall mean the
Employee Retirement
Income
Security Act of 1974, as amended;
(ix) "FMLA" shall mean the Family Medical Leave Act
of 1993, as amended;
(x) "INTERNATIONAL
EMPLOYEE PLAN" shall mean each
Company Employee Plan
and each Employment
Agreement that has
been adopted, maintained or entered into by the Company or any
Affiliate, whether
informally or formally, or with respect to
which the Company or any Affiliate will or may have any
liability, outside the
jurisdiction
of the United States
or
for the benefit of any
Employee or Employees who perform
services outside the United States;
(xi) "IRS" shall mean the Internal Revenue Service;
(xii) "MULTIEMPLOYER
PLAN" shall mean any
employee
benefit plan which is
a "multiemployer
plan," as defined
in
Section 3(37) of ERISA;
(xiii) "PENSION
PLAN" shall mean each employee
benefit plan which is
an "employee
pension benefit plan,"
within the meaning of Section 3(2) of ERISA.
(b) SCHEDULE. SECTION 2.11(B) of the Company Schedule contains
an accurate and complete list of each material Company Employee Plan
and each Employment
Agreement.
The Company does not
have any plan or
commitment to
establish any new
Company Employee
Plan or Employment
Agreement, to modify
any Company Employee Plan or Employment Agreement
(except to the extent required by applicable Legal Requirements or to
conform any such
Company Employee Plan
or Employment
Agreement to the
requirements of any
applicable
Legal Requirements, in each case as
previously disclosed
to Parent in
writing, or as required by this
Agreement), or to
adopt or enter into
any Company
Employee Plan or
Employment Agreement.
(c) DOCUMENTS. The
Company has provided to Parent correct and
complete copies of: (i) all documents embodying each Company
Employee
Plan and each Employment Agreement including (without
limitation) all
amendments thereto
17
<PAGE>
and all related trust
documents,
administrative service
agreements,
group annuity
contracts,
group insurance contracts, and policies
pertaining to fiduciary liability insurance covering the fiduciaries
for each Plan, a written description of each material
Company Employee
Plan that is not set forth in a written document; (ii) the three (3)
most recent annual
actuarial valuations, if any, prepared for each
Company Employee Plan;
(iii) the three (3)
most recent annual reports
(Form Series 5500 and all schedules and financial statements attached
thereto, or otherwise), if any, required under ERISA, the Code or
other
applicable Legal
Requirement in
connection with each Company Employee
Plan; (iv) the most recent summary plan description together with the
summary(ies) of material modifications thereto, if any,
required under
ERISA with
respect to each Company Employee Plan; (v) all IRS
determination,
opinion, notification
and advisory
letters, and all
material applications
and correspondence to or from the IRS or the DOL
with respect
to any such
application
or letter;
(vi) all material
communications to any
Employee or
Employees relating to any Company
Employee Plan and any proposed Company Employee Plans, in each case,
relating to any amendments, terminations, establishments, increases or
decreases in benefits, acceleration of payments or vesting
schedules or
other events
which would reasonably be expected to result in any
material liability to the Company; (vii) all correspondence to or
from
any governmental
agency relating to any Company Employee Plan; (viii)
all COBRA forms and
related notices (or such forms and notices as
required under comparable Legal Requirements); (ix) the three (3) most
recent plan years
discrimination tests for each Company Employee Plan;
and (x) all registration statements, annual reports (Form 11-K and
all
attachments thereto) and prospectuses prepared in connection with
each
Company Employee Plan.
(d) EMPLOYEE PLAN
COMPLIANCE. Each
Company Employee Plan has
been established and maintained in all material respects in accordance
with its terms and in compliance with all applicable Legal
Requirements,
including ERISA and the Code. Each Company Employee Plan
intended to qualify under Section 401(a) or Section 401(k) of the
Code
and each trust intended to qualify under Section 501(a) of the Code
has
either (i) received a favorable determination, opinion,
notification or
advisory letter from the IRS with respect to each such Company
Employee
Plan as to its qualified status, and each such trust as to its
exempt
status, under the
Code, including all
amendments to the Code effected
by the Tax legislation
commonly known as "GUST", and, to the Company's
knowledge, no
fact or event has occurred since the date of such
determination,
opinion, notification
or advisory letter to
adversely
affect the qualified
status of any such
Company Employee Plan
or the
exempt status of each
such trust,
or (ii) has
remaining a period
of
time under applicable
Treasury regulations
or IRS pronouncements
in
which to apply for such a letter and make any amendments necessary to
obtain a favorable
determination as to
the qualified
status of each
such Company
Employee Plan. No material "prohibited transaction,"
within the meaning of Section 4975 of the Code or Sections 406
and 407
of ERISA, and not
otherwise exempt under Section 4975 of the
Code or
Section 408 of ERISA
(or any administrative
class exemption issued
thereunder), has
occurred with respect to any Company Employee Plan.
There are no actions,
suits or claims pending, or, to the knowledge of
the Company,
threatened or reasonably anticipated (other than
routine
claims for benefits)
against or with
respect to any Company
Employee
Plan or any Employment
Agreement or against
the assets of any Company
Employee Plan. Each Company Employee Plan can be
18
<PAGE>
amended, terminated or otherwise discontinued after the Effective
Time,
without material liability to Parent, Company or any of its
Affiliates
(other than ordinary
administration
expenses).
There are no
audits,
inquiries or proceedings pending or, to the knowledge of the
Company or
any Affiliates,
threatened
by the IRS or DOL with respect to any
Company Employee
Plan. The Company is not subject to any material
penalty or tax with respect to any Company Employee Plan under Title I
of ERISA or Sections 4975 through 4980 of the Code. All
contributions,
reserves or premium
payments required to
be made or accrued as of the
date hereof to the
Company Employee Plans have been timely made or
accrued. Each "nonqualified deferred compensation plan" (as
defined in
Section 409A(d)(1) of the Code) has been operated since January 1,
2005
in good faith
compliance with
Section 409A of the Code and IRS Notice
2005-1 and the Internal Revenue Service's proposed regulations under
Section 409A of the Code and no such plan has been materially
modified
since October 3, 2004. No nonqualified deferred compensation plan has
been "materially modified" (within the meaning of IRS Notice
2005-1) at
any
time after October 3, 2004.
(e) PENSION PLAN.
Neither the Company
nor any Affiliate
has
ever maintained,
established,
sponsored,
participated
in, or
contributed to, any
Pension Plan which is subject to Title IV of ERISA
or Section 412 of the Code.
(f) COLLECTIVELY
BARGAINED,
MULTIEMPLOYER
AND MULTIPLE
EMPLOYER PLANS. At no time has the Company or any Affiliate
contributed
to, participated
in, or been obligated to contribute to any
Multiemployer Plan.
Neither the Company,
nor any Affiliate has at any
time ever maintained, established, sponsored, participated in, or
contributed to any
plan described in Section 413 of the Code or to any
plan that was also at that time sponsored, participated in, or
contributed to by any employer other than the Company or an
Affiliate.
(g) NO SEVERANCE OR POST-EMPLOYMENT OBLIGATIONS. Except as set
forth on SECTION 2.11(G) of the Company Schedule, no Company Employee
Plan provides
for the payment of
severance or other benefits upon
termination of
employment.
No Company
Employee Plan provides, or
reflects or represents any liability to provide retiree health or
other
welfare benefits
to any person for any reason, except as may be
required by COBRA or other applicable statute, and the Company has no
expected liability
or obligation as a result of representations,
promises or contracts
(whether in oral or written form) to or with any
Employee (either
individually or to Employees as a group) or any other
person that such
Employee(s) or other
person would be
provided with
retiree health or other welfare benefits, except to the extent
required
by statute.
(h) HEALTH
CARE COMPLIANCE. Neither the Company nor any
Affiliate has,
prior to the Effective Time and in any material respect,
violated any of the health care continuation requirements of COBRA,
the
requirements of
FMLA, the requirements of the Health Insurance
Portability and
Accountability
Act of 1996, the
requirements of
the
Women's Health and Cancer Rights Act of 1998, the requirements of the
Newborns' and Mothers' Health Protection Act of 1996, or any
amendment
to each such act, or any similar provisions of state law applicable
to
its Employees.
19
<PAGE>
(i) EFFECT OF TRANSACTION.
(i) The execution of this Agreement and the
consummation of the
Transactions
will not (either
alone or
upon the occurrence of
any additional or
subsequent events)
constitute an
event under any Company Employee Plan,
Employment Agreement,
trust or loan that will or may result in
any payment
(whether
of severance pay or otherwise),
acceleration, forgiveness
of indebtedness,
vesting,
distribution, increase
in benefits or obligation to fund
benefits with respect to any Employee.
(ii) No payment or benefit which will or may be made
by the Company or its Affiliates with respect to any Employee
or any other
"disqualified
individual" (as
defined in Code
Section 280G
and the regulations thereunder) will,
individually or in combination with any other such payment, be
characterized as a "parachute payment," within the meaning
of
Section 280G(b)(2) of the Code.
(j) EMPLOYMENT MATTERS. The Company: (i) is in compliance in
all material respects with all applicable foreign, federal, state and
local Legal Requirements respecting employment,
employment
practices,
terms and conditions of employment and wages and hours, in each case,
with respect to
Employees; (ii) has
withheld and reported all amounts
required by Legal
Requirements or by
agreement to be withheld and
reported with
respect to wages, salaries and other payments to
Employees; (iii) is not liable for any arrears of wages or any
taxes or
any penalty for failure to comply with any of the foregoing; and (iv)
is not liable for any payment to any trust or other fund governed
by or
maintained by or on behalf of any governmental authority,
with respect
to unemployment
compensation
benefits, social security or other
benefits or obligations for Employees (other than routine payments to
be made in the normal
course of business and consistent with past
practice). Except
as set forth on SECTION 2.11(J) of the Company
Schedule, there are no
pending, threatened or
reasonably
anticipated
claims or actions
against the Company under any worker's compensation
policy or long-term disability policy.
(k) EMPLOYEE
INFORMATION. The
Company has made
available to
Parent a true, correct
and complete list setting forth the names,
positions and rates of compensation of all current officers,
directors,
employees and
consultants
of the Company, as of the date hereof,
showing each such person's name, positions, and annual remuneration,
bonuses and fringe
benefits for the
current fiscal year
and the most
recently completed
fiscal year. To the
knowledge of the
Company, no
executive or key employee of the Company has any plans to terminate
his
or her employment with the Company. All independent contractors have
been properly classified as independent contractors for the
purposes of
federal and applicable
state tax laws,
laws applicable to employee
benefits and other
applicable
law except to the
extent such
failure
could not reasonably
be expected to result in a Material Adverse
Effect. SECTION
2.11(K) of the Company
Schedule sets forth a
list of
all former consultants of the Company.
(l) LABOR. No work stoppage, labor strike or slowdown
against
the Company is
pending, threatened
or reasonably anticipated. The
Company does not
20
<PAGE>
know of any activities
or proceedings
of any labor union to
organize
any
Employees. There are
no actions, suits,
claims, labor disputes or
grievances pending, or, to the knowledge of the Company,
threatened or
reasonably anticipated
relating to any labor, safety or discrimination
matters involving any Employee, including, without limitation,
charges
of unfair labor
practices or
discrimination
complaints,
which, if
adversely determined,
would, individually or in the aggregate, result
in any material
liability to the Company. Neither the Company nor any
of its subsidiaries
has engaged in any
unfair labor practices
within
the meaning of the
National Labor
Relations Act. The Company is not
presently, nor has it
been in the past, a
party to, or bound by,
any
collective bargaining
agreement or union contract with respect to
Employees and no collective bargaining agreement is being
negotiated by
the Company.
(m) INTERNATIONAL
EMPLOYEE PLAN. Neither
the Company nor any
of its Affiliates has ever established, maintained or administered an
International Employee Plan.
(n) WARN ACT.
The Company has complied with the Workers
Adjustment and Retraining Notification Act of 1988, as amended ("WARN
ACT") and all similar
state Legal
Requirements including
applicable
provisions of the California Labor Code. All Liabilities relating to
the employment,
termination
or employee benefits of any former
Employees previously
terminated
by the Company or an Affiliate
including, without
limitation,
all termination pay,
severance pay or
other amounts in
connection
with the WARN Act and
all similar state
Legal Requirements
including applicable
provisions of the
California
Labor Code, shall be the responsibility of the Company.
(o) SECTION
409A. Each Company Employee Plan that is a
deferred compensation
arrangement has been
identified as either being
exempt from Section
409A of the Code or as
subject to Section 409A of
the Code (and
identified
as either an account balance plan or a
non-account balance
plan, and equity plan
or a severance plan).
Any
Equity Award
grants by the Company
to its employees,
directors and
other service
providers were made over Company Common Stock, have an
exercise price that is at least equal to
the fair market value
of the
Company Common Stock
on the date that Equity Awards were granted, and
the determination
of the fair market value of such Equity Awards
satisfied the valuation requirements of Section 409A of the
Code.
2.12 PROXY STATEMENT.
Subject to the
limitation set forth in the last
sentence of this SECTION 2.12, (a) neither the proxy statement to
be sent to the
stockholders of the
Company in connection
with the Stockholders'
Meeting (as
hereinafter defined),
nor any amendment or supplement thereto (such proxy
statement, as amended
or supplemented,
being referred to
herein as the "PROXY
STATEMENT"), shall,
at the date
the Proxy Statement (or any amendment or
supplement thereto) is
first mailed to
stockholders
of the Company or at
the
time of the Stockholders' Meeting (as defined in SECTION 5.2
hereof), and (b) no
other documents
that may be filed with the SEC in connection with the
transactions contemplated by this Agreement shall, at the
respective times filed
with the SEC, in each case contain any untrue statement of material fact, or
omit to state any material fact required to be stated therein or necessary in
order to make the statement therein, in light of the circumstances
under which
it was made, not false or misleading. The Proxy
21
<PAGE>
Statement shall comply in all material respects as to form with the
requirements
of the Exchange Act and the rules and regulations thereunder. Notwithstanding
the foregoing,
no representation is made by the Company in this
SECTION 2.12
with respect to
statements
made based on
information
supplied by Parent or
Merger Sub in writing specifically for inclusion in the Proxy
Statement.
2.13 RESTRICTIONS
ON BUSINESS ACTIVITIES. There is no Contract
(noncompete or otherwise), or to the Company's knowledge,
judgment,
injunction,
order or decree,
binding upon the Company or its subsidiaries or to which the
Company or
any of its subsidiaries is a party which has the effect of
prohibiting or
limiting any business practice of the Company or any of its
subsidiaries, any
acquisition
of property by the Company or any of its
subsidiaries, the
solicitation
or hiring of any person or the conduct of
business by the
Company or any of its
subsidiaries
as currently conducted.
Without limiting the foregoing, neither the Company nor any of its
subsidiaries
has entered
into any Contract under which it is restricted from selling,
licensing or otherwise
distributing
any of its
technology
or products to or
providing or seeking to provide services to, customers or potential
customers or
any class of customers, in any geographic area, during any
period of time or in
any segment of the market.
2.14 TITLE TO PROPERTY.
(a) Neither the Company nor any of its subsidiaries owns any
real property. SECTION
2.14(A)(I) of the Company Schedule sets forth a
list of all real property currently leased by the Company or any of
its
subsidiaries. SECTION
2.14(A)(II) of the Company Schedule sets forth a
list of all real property previously owned by the Company or any of
its
subsidiaries. All such current leases are in full force and effect,
are
valid and effective in
accordance with their
respective
terms, and
there is not, under any of such leases, any existing default or event
of default (or event which with notice or lapse of time, or both,
would
constitute a default) of the Company or any of its subsidiaries,
or to
the knowledge of the Company, any other party thereto. The
Company has
made available
to Parent true,
complete and correct copies of each
lease set forth on SECTION 2.14(A)(I) of the Company Schedule,
and all
amendments and modifications thereto. Each of the properties
listed on
SECTION 2.14(A)(II) of
the Company Schedule were property transferred
to third parties,
are no longer owned by
the Company and there are no
outstanding, ongoing
or residual obligations by the Company with
respect to such properties.
(b) The Company
and each of its subsidiaries has good and
valid title to, or, in the case of leased properties and assets,
valid
leasehold interests
in, all of its properties and assets, real,
personal and
mixed, used or held for use in its
business, free and
clear of all Liens,
except for Permitted Liens (as defined below). As
used in this Agreement, "PERMITTED LIENS" means: (i) Liens for Taxes
(as herein
defined) not yet due and payable or which are being
contested in good
faith by appropriate proceedings and for which
adequate
reserves have
been established; (ii) Liens securing
indebtedness or other
liabilities
reflected in the Interim Balance
Sheet; (iii) such non-monetary Liens or other imperfections of title,
if any, that, individually or in the aggregate, would not be
reasonably
likely to (A) materially interfere with the present use or
operation of
any
22
<PAGE>
material property or asset of the Company or any of its
subsidiaries or
(B) materially
detract from the value of such
material property or
asset; (iv) Liens
imposed or promulgated
by Laws with respect to real
property and
improvements,
including zoning
regulations;
(v) Liens
disclosed on existing title reports or existing surveys (in either
case
copies of which title
reports and surveys have been delivered or made
available to
Parent); and (vi) mechanics', carriers', workmen's ,
repairmen's and
similar Liens incurred in the ordinary course of
business.
(c) All the plants,
structures and
equipment of the
Company
and its subsidiaries,
are in satisfactory condition and repair for
their current and intended use by the Company, reasonable wear and
tear
excepted, except where
the failure to be in satisfactory condition and
repair would
not reasonably be likely to have a Material Adverse
Effect.
2.15 TAXES.
(a) DEFINITION OF TAXES. For the purposes of this
Agreement,
"TAX" or "TAXES"
means (i) any and all federal, state, local and
foreign taxes,
assessments and other
governmental
charges, duties,
impositions and liabilities, including taxes based upon or
measured by
gross receipts,
income, profits, sales, use and occupation, and value
added, ad valorem, transfer, franchise, withholding, payroll,
recapture, employment,
excise and property
taxes, together with all
interest, penalties and additions imposed with respect to such
amounts;
(ii) any liability for the payment of any amounts of the type
described
in clause (i) as a result of being a member of an affiliated,
consolidated, combined
or unitary group for any period; and (iii) any
liability for the
payment of any amounts of the type described in
clause (i) or (ii) as a result of any express or implied
obligation to
indemnify any other person or as a result of any obligations
under any
agreements or
arrangements with any
other person with respect to such
amounts and including any liability for taxes of a predecessor
entity.
(b) TAX
RETURNS AND AUDITS.
(i) The Company
and each of its
subsidiaries
have
timely filed all
Returns (defined
below). Such Returns are
true, correct and
complete in all material respects. The
Company and each of its subsidiaries have paid or withheld and
paid to the appropriate Tax authority all material amounts of
Taxes due, whether or not shown to be due on such Returns.
As
used in this Agreement, "RETURNS" means federal, state,
local
and foreign returns, forms, estimates, information statements
and reports
relating to Taxes required to be filed by the
Company and each of its subsidiaries with any Tax authority.
(ii) The Company and
each of its
subsidiaries have
withheld and paid to the appropriate Tax authority all Taxes
required to be withheld and paid in connection with amounts
paid and owing to any employee, independent contractor,
creditor, stockholder
or other third party (whether domestic
or foreign).
23
<PAGE>
(iii) Neither the Company nor any of its subsidiaries
has been delinquent in
the payment of any material Tax nor is
there any material Tax
deficiency
outstanding,
proposed or
assessed against the Company or any of its subsidiaries, nor
has the Company or any of its subsidiaries executed any
unexpired waiver of any statute of limitations on or extension
of any the period for the assessment or collection of any Tax.
(iv) No audit or other
examination of any
Return of
the Company or any of its subsidiaries by any Tax authority is
presently in
progress, nor has the Company or any of its
subsidiaries been notified of any request for such an audit or
other examination. The Company has delivered or made available
to Parent true and
complete copies of income tax Returns
of
the Company and its subsidiaries for the years ended September
30, 2001, 2002,
2003, 2004 and 2005, and true and complete
copies of all examination reports and statements of
deficiencies assessed
against or agreed to by any of the
Company and its subsidiaries or any predecessor, with respect
to income Taxes.
No material
claim in writing has
ever been
made by a Tax authority in a jurisdiction where the Company or
any of its
subsidiaries do not
file Returns that any
of the
Company or its
subsidiaries
is or may be
subject to a Tax
liability in that jurisdiction.
(v) No adjustment
relating to any
Returns filed or
required to be filed by the Company or any of its subsidiaries
has been proposed in writing, formally or informally,
by any
Tax authority to the Company or any of its subsidiaries or any
representative thereof.
(vi) Neither the Company nor any of its subsidiaries
has any liability for any unpaid material Taxes (whether or
not shown to be due on any Return) which has not been accrued
for or reserved on the
Company's Interim Balance Sheet in
accordance with
GAAP, whether asserted or unasserted,
contingent or
otherwise, other than
any liability for unpaid
Taxes that may have accrued since the Interim Balance Sheet
Date in connection
with the operation of
the business of the
Company and its subsidiaries in the ordinary course. There are
no Liens with respect
to material Taxes on
any of the assets
of the Company or any of its subsidiaries, other than
customary Liens for Taxes not yet due and payable.
(vii) Except as set forth on SECTION 2.15(B)(VII) of
the Company
Schedule,
there
is no Contract, plan or
arrangement to which the Company or any of its subsidiaries is
a party as of the date of this Agreement, including the
provisions of this Agreement, covering any employee or
former
employee of the
Company or any of its subsidiaries that,
individually or collectively, would reasonably be expected
to
give rise to the
payment of any amount that would not be
deductible pursuant to
Sections 280G or 162(m) of the Code.
There is no Contract, plan or arrangement to which the Company
or any of its
subsidiaries is a party or by which it is bound
to compensate any individual for excise taxes paid pursuant to
Section 4999 of the Code.
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(viii) Neither
the Company nor any of its
subsidiaries is
party to or has any obligation under any
tax-sharing, tax
indemnity or tax allocation agreement or
arrangement. Neither
the Company nor any of its subsidiaries
has ever been a
member of a group filing a consolidated,
unitary, combined or
similar Return (other than Returns which
include only the
Company and any of its
subsidiaries)
under
any
federal, state, local or foreign Legal Requirements.
Neither the
Company nor any of its subsidiaries has any
liability for Taxes of
any person other than
the Company and
its subsidiaries
(i) under Treasury Regulations Section
1.1502-6 (or any similar provision of state, local or foreign
Legal Requirements),
(ii) as a transferee or successor, (iii)
by contract, or (iv) otherwise. Neither the Company nor any of
its subsidiaries is party to any joint venture, partnership or
other arrangement
that could be treated
as a partnership for
federal and applicable state, local or foreign Tax purposes.
(ix) None of the Company's or its subsidiaries'
assets are tax
exempt use
property within the meaning of
Section 168(h) of the Code. Neither the Company nor any of its
subsidiaries has
agreed, or is or was
required, to make
any
adjustment under
Section 481(a) of the Code by reason of a
change in accounting
method or otherwise (or by reason of any
similar
provision of
state, local or foreign Legal
Requirements).
(x) Neither the
Company nor any of its
subsidiaries
has constituted
either a "distributing corporation" or a
"controlled
corporation" in a
distribution of stock intended
to qualify for
tax-free treatment
under Section 355 of the
Code (x) in the two years prior to the date of this Agreement
or (y) in a distribution which could otherwise constitute part
of a "plan" or "series of related transactions" (within the
meaning of Section 355(e) of the Code) in conjunction with the
Transactions.
(xi) Neither the Company nor any of its subsidiaries
has been a party to a "reportable transaction," as such term
is defined in Treasury
Regulations Section
1.6011-4(b)(1) or
to a transaction
that is or is
substantially
similar to a
"listed transaction,"
as such term is
defined in Treasury
Regulations Section
1.6011-4(b)(2), or any
other transaction
requiring disclosure
under analogous provisions of state,
local or foreign Tax Legal Requirement.
(xii) Neither the Company nor any of its subsidiaries
has, or has had, any
permanent
establishment in any
foreign
country, as defined in any applicable Tax convention.
2.16 ENVIRONMENTAL MATTERS.
(a) For purposes of this Agreement, the following terms shall
have the meanings set forth below:
(i) "ENVIRONMENTAL
LAW" shall
mean any applicable
federal, state,
local
and foreign laws, regulations,
ordinances, and common law relating to
25
<PAGE>
pollution or
protection
of human health (to the extent
relating to exposure to Materials of Environmental Concern) or
protection of the environment (including, without limitation,
ambient air, surface
water, ground water, land surface or
subsurface strata, and natural resources), including, without
limitation, laws
and regulations relating to emissions,
discharges, releases
or threatened
releases of, or
exposure
to, Materials of Environmental Concern.
(ii) "MATERIALS OF EN
