AGREEMENT AND PLAN OF MERGER
dated as of May 2, 2007
by and among
MITY ENTERPRISES, INC.,
FP MERGER SUB,
INC.,
and
MLE HOLDINGS, INC.
TABLE OF CONTENTS
Page
ARTICLE 1 THE MERGER
2
1.01
The Merger
2
1.02
Effective Time
2
1.03
Effects of the Merger
2
1.04
Articles of Incorporation and Bylaws of the Surviving
Corporation
2
1.05
Directors
2
1.06
Officers
2
1.07
Closing
2
1.08
Additional Actions
3
ARTICLE 2 EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
COMPANY AND MERGER SUB
3
2.01
Effect on Shares of Capital Stock
3
2.02
Options
4
2.03
Payment for Common Shares in the Merger
5
2.04
Adjustment of the Merger Consideration and the Cash Pay
Option Consideration
8
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
8
3.01
Organization and Qualification
8
3.02
Charter Documents and Bylaws
9
3.03
Capitalization
9
3.04
Authority Relative to this Agreement
10
3.05
Company Subsidiaries
11
3.06
No Violation; Required Filings and Consents
11
3.07
SEC Reports and Financial Statements
12
3.08
Compliance with Applicable Laws
13
3.09
Absence of Certain Changes or Events
13
3.10
Change of Control
14
3.11
Litigation
15
3.12
Information in Proxy Statement
15
3.13
Benefit Plans
15
3.14
Taxes
17
3.15
Intellectual Property
19
3.16
Licenses and Permits
21
3.17
Material Contracts
22
3.18
Environmental Laws
23
3.19
State Takeover Statutes
23
3.20
Opinion of Financial Advisor
23
3.21
Brokers
24
3.22
Related Party Transactions
24
3.23
Properties and Assets
24
3.24
Labor Matters
25
3.25
Insurance
25
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF MERGER SUB AND
PARENT
26
4.01
Organization and Qualification
26
4.02
Charter Documents and Bylaws
26
4.03
Authority Relative to this Agreement
26
4.04
No Violation; Required Filings and Consents
27
4.05
Financing
27
4.06
Brokers
28
4.07
Proxy Statement
28
ARTICLE 5 COVENANTS
28
5.01
Interim Operations
28
5.02
Shareholders Meeting
32
5.03
Filings; Consents, etc.
33
5.04
Access to Information
33
5.05
Notification of Certain Matters
34
5.06
Public Announcements
34
5.07
Indemnification; etc
35
5.08
Further Assurances; Commercially Reasonable Efforts
36
5.09
Third Party Standstill Agreements
36
5.10
No Solicitation
36
5.11
SEC Reports
39
5.12
Termination of Registration
39
5.13
Financing
39
5.14
Special Meeting
40
5.15
Shareholder Litigation
40
5.16
Transition Assistance
40
ARTICLE 6 CONDITIONS TO CONSUMMATION OF THE MERGER
41
6.01
Conditions to the Obligations of Each Party
41
6.02
Conditions to Obligations of Merger Sub and Parent
41
6.03
Conditions to Obligation of the Company
44
ARTICLE 7 TERMINATION
44
7.01
Termination by Mutual Consent
44
7.02
Termination by Merger Sub, Parent or the Company
45
7.03
Termination by Merger Sub and Parent
45
7.04
Termination by the Company
46
7.05
Effect of Termination
46
ARTICLE 8 MISCELLANEOUS
46
8.01
Payment of Fees and Expenses
46
8.02
Guarantee
48
8.03
No Survival
48
8.04
Modification or Amendment
49
8.05
Entire Agreement; Assignment
49
8.06
Severability
49
8.07
Notices
49
8.08
Governing Law
50
8.09
Descriptive Headings
51
8.10
Counterparts
51
8.11
Certain Definitions
51
8.12
Specific Performance
52
8.13
Extension; Waiver
52
8.14
Third-Party Beneficiaries
52
8.15
Submission to Jurisdiction
52
8.16
Incorporation of Exhibits
53
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
May 2, 2007,
is entered into by and among MITY Enterprises, Inc., a Utah
corporation (the
"Company"), FP Merger Sub, Inc., a Utah corporation ("Merger Sub"),
and MLE
Holdings, Inc., a Delaware corporation ("Parent").
RECITALS
WHEREAS, the board of directors of the Company (the "Company
Board"), subject
to the terms and conditions set forth herein, has (i) declared
the
advisability of this Agreement and approved this Agreement, (ii)
resolved to
recommend approval and adoption of this Agreement by the
shareholders of the
Company and (iii) received a written opinion of the Financial
Advisor (as
defined in Section 3.20) as set forth in Section 3.20 herein;
WHEREAS, the board of directors of Merger Sub has (i) declared
the
advisability of this Agreement and (ii) approved this
Agreement;
WHEREAS, Parent has adopted this Agreement in its capacity as the
sole
shareholder of Merger Sub;
WHEREAS, the Company Board and the board of directors of Merger Sub
have
approved the merger of Merger Sub with and into the Company, with
the Company
as the surviving corporation, upon the terms and subject to the
conditions set
forth in this Agreement and the Utah Revised Business Corporation
Act (the
"UBCA"), whereby (i) each issued and outstanding share of the
common stock,
par value $0.01 per share (the "Common Shares"), of the Company
(other than
Common Shares to be canceled pursuant to Section 2.01(b) and
Dissenting Shares
(as defined in Section 2.01(d))), shall be converted into the right
to receive
the Merger Consideration (as defined in Section 2.01(a)) and (ii)
each
Cash-Pay Option (as defined in Section 2.02(b)) shall be converted
into the
right to receive the Cash-Pay Option Consideration (as defined in
Section
2.02(b));
WHEREAS, concurrently with the execution of this Agreement, and as
a condition
and inducement to Parent's willingness to enter into this
Agreement, certain
shareholders of the Company are entering into voting agreements
with Parent;
and
WHEREAS, the Company, Merger Sub, and Parent desire to make
certain
representations, warranties, covenants and agreements in connection
with the
Merger, and also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and the
respective
representations, warranties, covenants and agreements set forth
herein, the
parties hereto agree as follows:
ARTICLE 1
THE MERGER
1.01
The Merger. At the
Effective Time (as defined in Section 1.02),
subject to the terms and conditions of this Agreement and in
accordance with
the provisions of the UBCA, Merger Sub shall be merged (the
"Merger") with and
into the Company.
Following the Merger, the separate corporate existence of
Merger Sub shall cease, and the Company shall continue as the
surviving
corporation (sometimes hereinafter referred to as the "Surviving
Corporation")
and shall continue to be governed by the laws of the State of
Utah.
1.02
Effective Time.
Subject to the provisions of this Agreement, on the
Closing Date the parties shall file with the Utah Department of
Commerce,
Division of Corporations and Commercial Code (the "Division")
articles of
merger (the "Articles of Merger"), executed in accordance with the
relevant
provisions of the UBCA. The Merger shall become effective
upon the filing of
the Articles of Merger with the Division or at such later time as
is agreed to
by the parties hereto and specified in the Articles of Merger (the
time at
which the Merger becomes effective is herein referred to as the
"Effective
Time").
1.03
Effects of the Merger.
The Merger shall have the effects set forth
herein, in the Articles of Merger and in the UBCA. Without limiting the
generality of the foregoing, and subject thereto, at the Effective
Time, all
the properties, rights, privileges, powers and franchises of the
Company and
the Merger Sub shall vest in the Surviving Corporation, and all
debts,
liabilities and duties of the Company and the Merger Sub shall
become the
debts, liabilities and duties of the Surviving Corporation.
1.04
Articles of Incorporation and Bylaws of the Surviving
Corporation.
The articles of incorporation of Merger Sub, as in effect
immediately prior to
the Effective Time, shall be the articles of incorporation of the
Surviving
Corporation until duly amended; provided that such articles of
incorporation
shall be amended to reflect that the name of the Surviving
Corporation shall
be "MITY Enterprises, Inc."
(a)
The bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the bylaws of the Surviving Corporation,
until duly
amended.
1.05
Directors. The
directors of Merger Sub immediately prior to the
Effective Time shall be the initial directors of the Surviving
Corporation and
shall hold office until their respective successors are duly
elected and
qualified, or their earlier death, resignation or removal in
accordance with
applicable law and the Surviving Corporation's articles of
incorporation and
bylaws.
1.06
Officers. The officers
of the Company immediately prior to the
Effective Time shall be the initial officers of the Surviving
Corporation and
shall hold office until their respective successors are duly
elected and
qualified, or their earlier death, resignation or removal.
1.07
Closing. Subject to
the conditions contained in this Agreement, the
closing of the Merger (the "Closing") shall take place (a) at the
offices of
Kirkland & Ellis LLP, 555 California Street, San Francisco,
California 94104,
on the later of (i) the date which is most promptly practicable
following the
date of the satisfaction (or waiver if permissible) of all of the
conditions
set forth in Article 6 (other than those conditions that by their
nature are
to be satisfied at the Closing, but subject to the satisfaction or
waiver of
such conditions), but in no event later than the fifth (5th)
business day
following such date and (ii) August 2, 2007 (the "Target Closing
Date") or (b)
at such other place and time and/or on such other date as the
Company and
Parent may agree in writing. The date on which the Closing
occurs is
hereinafter referred to as the "Closing Date."
1.08
Additional Actions.
If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds,
bills of
sale, assignments or assurances in law or any other acts 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 the Company or Merger Sub, the
Company and its
officers and directors shall be deemed to have granted to the
Surviving
Corporation an irrevocable power of attorney to execute and deliver
all such
deeds, assignments and assurances in law and to take all acts
necessary,
proper or desirable to vest, perfect or confirm title to and
possession of
such rights, properties or assets in the Surviving Corporation, and
the
officers and directors of the Surviving Corporation are authorized
in the name
of the Company to take any and all such action.
ARTICLE 2
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE COMPANY AND MERGER SUB
2.01 Effect on Shares of
Capital Stock
(a)
Common Shares of the Company. As of the Effective Time, by
virtue of
the Merger and without any action on the part of the holder of any
Common
Shares, the Company or Merger Sub, each Common Share that is issued
and
outstanding immediately prior to the Effective Time (other than (i)
Dissenting
Shares, and (ii) those Common Shares to be canceled pursuant to
Section
2.01(b)) shall be canceled and extinguished and converted into the
right to
receive $21.50 in cash (the "Merger Consideration"), payable to the
holder
thereof, without interest or dividends thereon, less any
applicable
withholding of taxes, in the manner provided in Section
2.03. All such
Common Shares, when so converted, shall no longer be outstanding
and shall
automatically be canceled and each holder of a certificate or
certificates
representing any such Common Shares shall cease to have any rights
with
respect thereto, except the right to receive the Merger
Consideration.
(b)
Cancellation of Certain Common Shares. As of the Effective Time, by
virtue of the Merger and without any action on the part of the
holder of any
Common Shares, the Company or Merger Sub, each Common Share that is
owned by
the Company or any wholly owned subsidiary as treasury stock or
otherwise or
owned by Merger Sub or Parent or any of their respective
subsidiaries
immediately prior to the Effective Time shall automatically be
canceled and
shall cease to exist, and no cash or other consideration shall be
delivered or
deliverable in exchange therefor.
(c)
Capital Stock of Merger Sub. As of the Effective Time, each
share of
common stock, par value $.01 per share, of Merger Sub ("Merger Sub
Common
Stock") issued and outstanding immediately prior to the Effective
Time shall,
by virtue of the Merger and without any action on the part of the
holders of
Merger Sub Common Stock, the Company or Merger Sub, be converted
into one
validly issued, fully paid and non-assessable share of common
stock, par value
$.01 per share, of the Surviving Corporation ("Surviving
Corporation Common
Stock"). Each
certificate that, immediately prior to the Effective Time,
represented issued and outstanding shares of Merger Sub Common
Stock shall,
from and after the Effective Time, automatically and without the
necessity of
presenting the same for exchange, represent the shares of the
Surviving
Corporation capital stock into which such shares have been
converted pursuant
to the terms hereof; provided, however, that the record holder
thereof shall
receive, upon surrender of any such certificate, a certificate
representing
the shares of Surviving Corporation Common Stock into which the
shares of
Merger Sub Common Stock formerly represented thereby shall have
been converted
pursuant to the terms hereof.
(d)
Dissenting Shares.
Notwithstanding anything in this Agreement to the
contrary, any Common Shares issued and outstanding immediately
prior to the
Effective Time and held by a holder (a "Dissenting Shareholder")
who held such
Common Shares as of the date of approval of the Merger by the
Shareholders of
the Company but has not voted in favor of the Merger or consented
thereto in
writing and who has properly demanded appraisal for such Common
Shares in
accordance with the UBCA ("Dissenting Shares") shall not be
converted into a
right to receive the Merger Consideration at the Effective Time in
accordance
with Section 2.01(a) hereof, but shall represent and become the
right to
receive such consideration as may be determined to be due to such
Dissenting
Shareholder pursuant to the laws of the State of Utah, unless and
until such
holder fails to perfect or withdraws or otherwise loses such
holder's right to
appraisal and payment under the UBCA. If a Dissenting Shareholder fails
to
perfect appraisal rights in accordance with the UBCA, or if such
holder
withdraws or otherwise loses such holder's right to appraisal, such
former
Dissenting Shares held by such holder shall be treated as if they
had been
converted as of the Effective Time into a right to receive, upon
surrender as
provided above, the Merger Consideration, without any interest or
dividends
thereon, in accordance with Section 2.01(a). The Company shall give Merger
Sub prompt notice of any demands received by the Company for
appraisal of
Common Shares, withdrawals of such demands and any other
instruments served
pursuant to the UBCA and received by the Company, and Merger Sub
shall have
the right to participate in and, after the Effective Time, to
direct, all
negotiations and proceedings with respect to such demands.
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.
2.02
Options.
(a)
For purposes of this Agreement, the term "Option" means each
outstanding unexercised option to purchase Common Shares, whether
or not then
vested or fully exercisable, granted on or prior to the date hereof
to any
current or former employee or director of the Company or any
subsidiary of the
Company or any other person, whether under any stock option plan or
otherwise
(including, without limitation, under the Company's 1997 Stock
Incentive Plan
and 2006 Stock Incentive Plan, each as amended) (together, the
"Stock Plans").
(b)
The Company shall take all actions necessary so that (i)
immediately
prior to the Effective Time, each outstanding Option that has a
per-share
exercise price less than the Merger Consideration (the "Cash-Pay
Options")
shall become immediately vested and exercisable in full and (ii) at
the
Effective Time, all Options shall be canceled, in each case, in
accordance
with and pursuant to the terms of the Stock Plans under which such
Options
were granted. In
consideration of such cancellation, each holder of a
Cash-Pay Option canceled in accordance with this Section 2.02(b)
will be
entitled to receive in settlement of such Cash-Pay Option as
promptly as
practicable following the Effective Time, but in no event later
than 10
business days after the Effective Time, a cash payment from the
Surviving
Corporation, subject to any required withholding of taxes, equal to
the
product of (i) the total number of Common Shares otherwise issuable
upon
exercise of such Cash-Pay Option and (ii) the Merger Consideration
per Common
Share less the applicable exercise price per Common Share otherwise
issuable
upon exercise of such Cash-Pay Option (the "Cash-Pay Option
Consideration");
provided, however, that with respect to any person subject to
Section 16 of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), any such
amount shall be paid as soon as practicable after the first date
payment can
be made without liability to such person under Section 16(b) of the
Exchange
Act. The Company Board
will fully accelerate the vesting schedule of the
Options issued under the Stock Plans.
(c)
Promptly following the Effective Time, Parent or Merger Sub
shall
deposit, or Parent or Merger Sub shall otherwise take all steps
necessary to
cause to be deposited, by wire transfer of immediately available
funds, with
the Surviving Corporation, cash in an aggregate amount equal to the
aggregate
Cash-Pay Option Consideration payable to all holders of vested
Options
pursuant to Section 2.01(b) (the "Option Fund" and, together with
the Payment
Fund, the "Closing Funds"). The Option Fund shall not be used
for any other
purpose except as provided in this Agreement.
(d)
Following the Effective Time and as a prerequisite to receiving
their
Cash-Pay Option Consideration, each holder of an Option whose
exercise price
is less than the Merger Consideration per Common Share shall be
required to
execute a written acknowledgment to the effect that (i) the payment
of the
Cash-Pay Option Consideration, if any, will satisfy in full the
Company's
obligation to such person pursuant to such Option and (ii) subject
to the
payment of the Cash-Pay Option Consideration, if any, such Option
held by such
holder shall, without any action on the part of the Company or the
holder, be
deemed terminated, canceled, void and of no further force and
effect as
between the Company and the holder and neither party shall have any
further
rights or obligations with respect thereto. Such written acknowledgment
shall
be substantially in the form attached hereto as Exhibit 2.02(d).
(e)
Prior to the Effective Time, the Company shall take all actions
that
are necessary to give effect to the transactions contemplated by
this Section
2.02.
2.03
Payment for Common Shares in the Merger.
(a)
Prior to the Effective Time, Merger Sub shall appoint a
commercial
bank or trust company reasonably acceptable to the Company to act
as exchange
and paying agent, registrar and transfer agent (the "Agent") for
the purpose
of exchanging certificates representing, immediately prior to the
Effective
Time, Common Shares for the aggregate Merger Consideration.
Promptly
following the Effective Time, Parent or Merger Sub shall deposit,
or Parent or
Merger Sub shall otherwise take all steps necessary to cause to be
deposited,
by wire transfer of immediately available funds, in trust with the
Agent for
the benefit of the holders of Common Shares, cash in an aggregate
amount equal
to (i) the product of (A) the number of Common Shares issued and
outstanding
immediately prior to the Effective Time and entitled to receive the
Merger
Consideration in accordance with Section 2.01(a) and (B) the
Merger
Consideration (the "Payment Fund"). The Agent shall, pursuant to
instructions
provided by Merger Sub, make the payments provided for in Section
2.01 of this
Agreement out of the Payment Fund (it being understood that any and
all
interest earned on funds made available to the Agent pursuant to
this
Agreement shall be turned over to the Surviving Corporation).
The Agent shall
be directed to invest the funds deposited in the Payment Fund only
in
obligations of the United States government or money market
accounts and/or
money market mutual funds reasonably acceptable to the Company.
The Payment
Fund shall not be used for any other purpose except as provided in
this
Agreement.
(b)
As soon as reasonably practicable after the Effective Time, but in
no
event later than 10 business days after the Effective Time, the
Surviving
Corporation shall cause the Agent to mail to each record holder
of
certificates (the "Certificates") that immediately prior to the
Effective Time
represented Common Shares (i) a notice of the effectiveness of the
Merger,
(ii) a form letter of transmittal which shall specify that delivery
shall be
effected, and risk of loss and title to the Certificates shall
pass, only upon
proper delivery of the Certificates to the Agent, and (iii)
instructions for
use in surrendering such Certificates and receiving the Merger
Consideration
in respect thereof.
(c)
Upon surrender to the Agent of a Certificate, together with
such
letter of transmittal duly executed and completed in accordance
with the
instructions thereto, the holder of such Certificate shall be
entitled to
receive, within 10 business days after such surrender, in exchange
therefor,
in the case of Common Shares (other than Common Shares to be
canceled pursuant
to Section 2.01(b)),
cash in an amount equal to the product of (i) the number
of Common Shares formerly represented by such Certificate and (ii)
the Merger
Consideration, which amounts shall be paid by Agent by check or
wire transfer
in accordance with the instructions provided by such holder.
No interest or
dividends will be paid or accrued on the consideration payable upon
the
surrender of any Certificate. If the consideration provided for
herein is to
be delivered in the name of a person other than the person in whose
name the
Certificate surrendered is registered, it shall be a condition of
such
delivery that the Certificate so surrendered shall be properly
endorsed or
otherwise in proper form for transfer and that the person
requesting such
delivery shall pay any transfer or other taxes required by reason
of such
delivery to a person other than the registered holder of the
Certificate, or
that such person shall establish to the satisfaction of the
Surviving
Corporation that such tax has been paid or is not applicable.
Until
surrendered in accordance with the provisions of this Section 2.03,
each
Certificate (other than Certificates representing Dissenting Shares
or Common
Shares to be canceled pursuant to Section 2.01(b)) shall represent,
for all
purposes, in the case of Certificates representing Common Shares
(other than
Common Shares to be canceled pursuant to Section 2.01(b)), only the
right to
receive an amount in cash equal to the Merger Consideration
multiplied by the
number of Common Shares formerly evidenced by such Certificate
without any
interest or dividends thereon.
(d)
The consideration issued upon the surrender of Certificates in
accordance with this Agreement shall be deemed to have been issued
in full
satisfaction of all rights pertaining to such Common Shares
formerly
represented thereby.
After the Effective Time, there shall be no transfers on
the stock transfer books of the Surviving Corporation of any Common
Shares
that were outstanding immediately prior to the Effective Time.
If, after the
Effective Time, Certificates are presented to the Surviving
Corporation, they
shall be canceled and exchanged as provided in this Article 2.
(e)
Any portion of the Payment Fund (including any amounts that may
be
payable to the former shareholders of the Company in accordance
with the terms
of this Agreement) which remains unclaimed by the former
shareholders of the
Company upon the 180th day immediately following the Closing Date
shall be
returned to the Surviving Corporation, upon demand, and any
former
shareholders of the Company who have not theretofore complied with
this
Article 2 shall, subject to Section 2.03(f), thereafter look to the
Surviving
Corporation only as general unsecured creditors thereof for payment
of any
Merger Consideration, without any interest or dividends thereon,
that may be
payable in respect of each Common Share held by such shareholder.
Following
the Closing, the Agent shall retain the right to invest and
reinvest the
Payment Fund on behalf of the Surviving Corporation in securities
listed or
guaranteed by the United States government or as otherwise
reasonably directed
by the Surviving Corporation, and the Surviving Corporation shall
receive the
interest earned thereon.
(f)
None of Merger Sub, the Company or Agent shall be liable to a
holder
of Certificates or any other person in respect of any cash
delivered to a
public official pursuant to any applicable abandoned property,
escheat or
similar law. If any
Certificates shall not have been surrendered by the sixth
anniversary of the Closing Date (or immediately prior to such
earlier date on
which any Merger Consideration, dividends (whether in cash, stock
or property)
or other distributions with respect to Common Shares in respect of
such
Certificate would otherwise escheat to or become the property of
any
Governmental Authority (as defined in Section 3.06(b)), any such
shares, cash,
dividends or distributions in respect of such Certificate shall, to
the extent
permitted by applicable law, become the property of the Surviving
Corporation,
free and clear of all claims or interests of any person previously
entitled
thereto.
(g)
In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit (in form and substance
acceptable
to the Surviving Corporation) of that fact by the person (who shall
be the
record owner of such Certificate) claiming such Certificate to be
lost, stolen
or destroyed and, if required by the Surviving Corporation, the
posting by
such person of a bond in such amount as the Surviving Corporation
may direct
as indemnity against any claim that may be made against it with
respect to
such Certificate, the Agent will issue in exchange for such lost,
stolen or
destroyed Certificate the Merger Consideration deliverable in
respect thereof
pursuant to this Agreement.
(h)
Each of the Agent, the Surviving Corporation and Parent shall
be
entitled to deduct and withhold from the consideration otherwise
payable to
any holder of Common Shares or Options pursuant to this Agreement
such amounts
as may be required to be deducted or withheld with respect to the
making of
such payment under the Internal Revenue Code of 1986, as amended
(the "Code"),
or any applicable provision of state, local or foreign tax law.
To the extent
that amounts are so deducted or withheld and paid over to the
appropriate
taxing authority by Agent, the Surviving Corporation or Parent,
such amounts
shall be treated for all purposes of this Agreement as having been
paid to
such former holder of Common Shares or Options, provided that the
withheld
amounts are actually remitted to the appropriate taxing
authority.
2.04
Adjustment of the Merger Consideration and the Cash Pay Option
Consideration.
The Merger Consideration and the Cash-Pay Option Consideration,
each payable
pursuant to this Article 2, have been calculated based upon the
representations and warranties made by the Company in Section 3.03.
In the
event that, at the Effective Time, the actual number of Common
Shares
outstanding and/or the actual number of Common Shares issuable upon
the
exercise of Options, or similar agreements or upon conversion of
securities
(including without limitation, as a result of any stock split,
reclassification, stock dividend (including any dividend or
distribution of
securities convertible into Common Shares) or recapitalization) is
more than
as described in Section 3.03 or if the weighted average exercise
price of the
Options is lower than described in Section 3.03 hereof, the
Merger
Consideration and the Cash-Pay Option Consideration shall be
equitably
adjusted downward. The
provisions of this Section 2.04 shall not, in any
event, adversely affect, constitute a waiver of or otherwise impair
any of
Merger Sub's rights under this Agreement (including any of Merger
Sub's rights
arising from any misrepresentation or breach of the representations
and
warranties set forth in Section 3.03 hereof).
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Company Disclosure Schedule (the
"Company
Disclosure Schedule") delivered to Parent on the date of this
Agreement (it
being agreed that disclosure of any item on the Company Disclosure
Schedule
shall be deemed to be a disclosure with respect to any other
Section or
subsection of this Article 3 to the extent the applicability of
such
disclosure to such other Section or subsection of this Article 3 is
reasonably
apparent on the face of such disclosure notwithstanding the
omission of any
cross-references to such other Section or subsection of this
Article 3), the
Company represents and warrants to each of Parent and Merger Sub as
follows:
3.01
Organization and Qualification. The Company and each of its
subsidiaries (as described in Section 3.05) is a corporation or
limited
liability company, as the case may be, duly organized or formed, as
the case
may be, validly existing and in good standing (to the extent
applicable) under
the laws of its state or jurisdiction of incorporation or
formation, as the
case may be, and has the requisite power and authority to carry on
its
business as now being conducted, except where the failure to be in
good
standing (to the extent applicable) would not, individually or in
the
aggregate, have a Company Material Adverse Effect (as defined
below). Except
as set forth on Section 3.01 of the Company Disclosure Schedule,
the Company
and each of its subsidiaries is duly qualified or licensed as a
foreign
corporation to do business, and is in good standing (to the
extent
applicable), in each jurisdiction where the nature of its business
makes such
qualification or licensing necessary, except where the failure to
be so
qualified or licensed and in good standing (to the extent
applicable) would
not, individually or in the aggregate, have a Company Material
Adverse Effect.
As used in this Agreement, the term "Company Material Adverse
Effect" means
any circumstance, effect, event, or change that, individually or in
the
aggregate (i) is, or is reasonably likely to be, materially adverse
to the
business, assets, condition (financial or otherwise) or results of
operations
of the Company and its subsidiaries, taken as a whole, other than
resulting
from any Excluded Matter or (ii) prevents or materially delays the
ability of
the Company and its subsidiaries to perform their obligations under
this
Agreement or to consummate the transactions contemplated hereby
(the
"Transactions") in accordance with the terms hereof. As used in this
Agreement, "Excluded Matter" means any one or more of the
following: (a) any
change or effect relating to local, regional, national or foreign
political,
economic or financial conditions or resulting from or arising out
of
developments or conditions in credit, financial or securities
markets,
including without limitation, conditions caused by acts of
terrorism or war
(whether or not declared) or any material worsening of such
conditions
existing as of the date of this Agreement, in each case, which does
not
materially, disproportionately affect the Company and its
subsidiaries taken
as a whole relative to other industry participants, (b) any change
or effect
generally affecting the industries, geographic areas or business
segments in
which the Company and its subsidiaries operate, including without
limitation,
any increase in the prices of raw materials, in each case, which
does not
materially, disproportionately affect the Company and its
subsidiaries taken
as a whole relative to other industry participants, (c) any change
or effect
resulting from any hurricane, earthquake or other natural
disasters, (d) any
change, in and of itself (as opposed to the facts underlying such
change), in
the share price or trading volume of the Common Shares on The
Nasdaq Stock
Market, (e) any change or effect resulting from a change after the
date of
this Agreement in accounting rules or procedures announced by the
Financial
Accounting Standards Board with respect to U.S. generally accepted
accounting
principles, (f) any failure, in and of itself (as opposed to the
facts
underlying such failure), to meet any internal budgets, plans,
projections or
forecasts of the Company's revenue, earnings or other financial
performance or
results of operations, or any published financial forecasts or
analyst
estimates of the Company's revenue, earnings or other financial
performance or
results of operations or any change in analyst recommendations, for
any
period, (g) any cancellation or delay in customer orders or any
loss of
customers resulting from the public announcement of the
Transactions or (h)
changes resulting from or arising out of any change in any Law
applicable to
the Company.
3.02
Charter Documents and Bylaws. The Company has heretofore made
available to Merger Sub a complete and correct copy of the articles
of
incorporation and the bylaws of the Company in full force and
effect as of the
date hereof. The
Company is not in violation of any of the provisions of its
articles of incorporation or bylaws. The Company has heretofore
made
available to Merger Sub a complete and correct copy of the articles
of
incorporation and the bylaws (or equivalent organizational
documents) of each
subsidiary of the Company in full force and effect as of the date
hereof. No
subsidiary of the Company is in violation of any of the provisions
of its
articles of incorporation or bylaws (or equivalent organizational
documents).
3.03
Capitalization.
(a)
The authorized capital stock of the Company consists of
10,000,000
Common Shares and 3,000,000 shares of preferred stock, par value
$0.10 per
share (the "Preferred Stock"). As of the date of this Agreement
(including
any Options or other rights exercisable or convertible for capital
stock of
the Company granted by the Company on or prior to the date of this
Agreement),
(i) 3,335,698 Common Shares were issued and outstanding, (ii) no
shares of
Preferred Stock were issued and outstanding and (iii) 1,200,000
Common Shares
were reserved for issuance pursuant to the Stock Plans, of which
442,589
Common Shares are subject to outstanding Options. The Company has outstanding
Cash-Pay Options pursuant to which an aggregate of 442,589 Common
Shares are
issuable and the weighted average exercise price for such Cash-Pay
Options is
$13.22. Except as set
forth in this Section 3.03, there are not now, and at
the Effective Time there will not be, any options, warrants,
calls,
subscriptions, or other rights, or other agreements or commitments
of any
character (including without limitation pursuant to any employee
stock
purchase plan) relating to the issued or unissued capital stock of
the Company
or obligating the Company to issue, transfer or sell any shares of
capital
stock of, or other equity interests in, the Company or any
subsidiary of the
Company. Section
3.03(a) of the Company Disclosure Schedule sets forth the
name of each holder of an Option, together with the grant date,
exercise price
and number of Common Shares issuable upon exercise of each such
Option. All
issued and outstanding Common Shares are duly authorized, validly
issued,
fully paid, nonassessable and free of preemptive rights.
All of the
outstanding shares of capital stock of, or other equity interests
in, each
subsidiary of the Company have been duly authorized and validly
issued and are
fully paid and non-assessable and, except as set forth on Section
3.03(a) of
the Company Disclosure Schedule, are owned by either the Company or
another of
its wholly-owned subsidiaries, free and clear of all liens,
charges, claims or
encumbrances. There
are no outstanding options, warrants, calls,
subscriptions, convertible securities or other rights, or other
agreements or
commitments, obligating any subsidiary of the Company to issue,
transfer or
sell any shares of its capital stock or other equity interests.
There are no
outstanding obligations of the Company or any of its subsidiaries
to
repurchase, redeem or otherwise acquire any shares of capital stock
of, or
other equity interests in, the Company or any subsidiary of the
Company.
(b)
Other than the voting agreements referred to in the recitals hereto
or
as set forth on Section 3.03(b) of the Company Disclosure Schedule,
to the
knowledge of the Company, there are no shareholders agreements,
voting trusts
or other agreements or understandings relating to voting or
disposition of any
shares of capital stock of the Company or granting to any person or
group of
persons the right to elect, or to designate or nominate for
election, a
director to the Company Board.
3.04
Authority Relative to this Agreement. The Company has the requisite
corporate power and authority to execute and deliver this
Agreement, to
perform its obligations hereunder and, subject to the adoption of
this
Agreement and the Merger by the holders of a majority of the
outstanding
Common Shares entitled to vote thereon, to consummate the
Transactions
pursuant to the UBCA.
The Company Board, at a meeting duly called and held,
has unanimously (i) declared the advisability of this Agreement and
approved
this Agreement and (ii) resolved to recommend that the shareholders
of the
Company approve and adopt this Agreement. The execution and delivery of
this
Agreement and the consummation of the Merger and the other
Transactions have
been duly and validly authorized by all necessary corporate action
and no
other corporate proceedings on the part of the Company are
necessary to
authorize the Company's execution and delivery of this Agreement or
to
consummate the Transactions (other than the adoption of this
Agreement and the
Merger by the holders of a majority of the outstanding Common
Shares entitled
to vote thereon (the "Shareholder Approval") and the filing or
recordation of
appropriate merger documents as required by the UBCA). This Agreement has
been duly and validly executed and delivered by the Company, and
(assuming
this Agreement constitutes a valid and binding obligation of Merger
Sub and
Parent) constitutes the 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. The Company
has no reason to believe that it will be unable to
satisfy, on a timely basis, any material term or condition to be
satisfied by
it or any of its affiliates relating to the sale-leaseback of the
real
property of the Company described in the Debt Commitment Letters
(as defined
in Section 4.05) (the "Sale-Leaseback").
3.05
Company Subsidiaries.
Section 3.05 of the Company Disclosure
Schedule contains a correct and complete list of each subsidiary of
the
Company and the jurisdiction in which each such subsidiary is
incorporated or
organized. Section
3.05 of the Company Disclosure Schedule sets forth for
each subsidiary of the Company: (i) its authorized capital stock or
share
capital; (ii) the number of issued and outstanding shares of
capital stock or
share capital; and (iii) the Company's direct or indirect equity
interest
therein. Except for equity interest in its subsidiaries, the
Company does not
own, directly or indirectly, any capital stock or other ownership
interest in
any Person. No
subsidiary of the Company owns, directly or indirectly, any
capital stock or other ownership interest in any Person, except for
the
capital stock and/or other ownership interest in another
wholly-owned
subsidiary of the Company.
3.06
No Violation; Required Filings and Consents.
(a)
The execution and delivery by the Company of this Agreement does
not,
and the performance of this Agreement by the Company and the
consummation of
the Transactions will not, (i) conflict with or violate any
provision of the
Company's articles of incorporation or bylaws or conflict with or
violate any
provision of the articles of incorporation or bylaws or
equivalent
organization documents of any subsidiary of the Company, (ii)
assuming that
all consents, approvals, authorizations and other actions described
in Section
3.06(b) have been obtained and all filings and obligations
described in
Section 3.06(b) have been made or complied with, conflict with or
violate any
foreign or domestic (federal, state or local) law, statute,
ordinance, rule,
regulation, permit, license, injunction, writ, judgment, decree or
order
(each, a "Law" and, collectively, "Laws") applicable to the Company
or any of
its subsidiaries or by which any asset of the Company or any of
its
subsidiaries is bound or affected, (iii) except as set forth in
Section
3.06(a) of the Company Disclosure Schedule, conflict with, 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 give to others any
right of
termination, amendment, acceleration or cancellation of, or require
any
payment under, or give rise to a loss of any benefit to which the
Company or
any subsidiary of the Company is entitled under any provision of
any contract,
instrument, permit, concession, franchise, license, loan or credit
agreement,
note, bond, mortgage, indenture, lease or other property
agreement,
partnership or joint venture agreement or other legally binding
agreement,
whether oral or written (each, a "Contract" and, collectively,
"Contracts"),
applicable to the Company or any such subsidiary or their
respective
properties or assets or (iv) to the Company's knowledge, result in
the
creation or imposition of a lien, claim, security interest or other
charge,
title imperfection or encumbrance (each, a "Lien" and,
collectively,
"Liens")
on any asset of the Company or any subsidiary of the Company,
except in the
case of clauses (ii), (iii) and (iv) of this Section 3.06(a), to
the extent
that any such conflict, violation, breach, default, right, loss or
Lien would
not, individually or in the aggregate, have a Company Material
Adverse Effect.
(b)
The execution and delivery by the Company of this Agreement does
not,
and the performance of this Agreement and the consummation by the
Company of
the Transactions will not, require any consent, approval,
authorization or
permit of, or filing with or notification to, any domestic
(federal, state or
local) or foreign government or governmental, regulatory or
administrative
authority, agency, commission, board, bureau, court or
instrumentality or
arbitrator of any kind ("Governmental Authority"), except (i) for
applicable
requirements, if any, of the Exchange Act, the Securities Act of
1933, as
amended (the "Securities Act"), the Hart-Scott-Rodino Antitrust
Improvements
Act of 1976, as amended (the "HSR Act"), and the rules and
regulations
thereunder, any required consent, approval, authorization, permit,
filing or
notification pursuant to applicable foreign merger control or
competition laws
and regulations and filing and recordation of appropriate documents
for the
Merger as required by the UBCA, (ii) for any applicable
notification
requirement with respect to the various transactions contemplated
under
Section 2.02 and Section 2.03 with respect to the Stock Plans and
(iii) 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, have a Company Material Adverse Effect.
3.07
SEC Reports and Financial Statements.
(a)
Since April 1, 2004, the Company has filed all forms, reports,
statements, schedules and other documents (the "SEC Reports") with
the
Securities and Exchange Commission (the "SEC") required to be filed
by it
pursuant to the federal securities laws and the SEC rules and
regulations
thereunder. The SEC
Reports (i) were prepared in all material respects in
accordance with the requirements of the Securities Act, the
Exchange Act and
the published rules and regulations of the SEC thereunder, each as
applicable
to such SEC Reports and (ii) did not as of the time they were filed
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,
not
misleading, except to the extent corrected prior to the date hereof
by a
subsequently filed SEC Report. No subsidiary of the Company is
subject to the
periodic reporting requirements of the Exchange Act. As of the date hereof,
there are no material unresolved comments issued by the staff of
the SEC with
respect to any of the SEC Reports.
(b)
Each of the consolidated financial statements (including, in
each
case, any notes thereto) of the Company included in the SEC Reports
has been
prepared in all material respects in accordance with the published
rules and
regulations of the SEC (including Regulation S-X) as at the date of
the filing
of such reports, and in accordance with United States generally
accepted
accounting principles applied on a consistent basis throughout the
periods
indicated (except as otherwise stated in such financial statements,
including
the related notes) and each fairly presents, in all material
respects, the
consolidated financial position, results of operations and cash
flows of the
Company and its consolidated subsidiaries as at the respective
dates thereof
and for the respective periods indicated therein, except as
otherwise set
forth in the notes thereto (subject, in the case of unaudited
statements, to
the absence of complete footnote disclosure and to normal and
recurring
year-end adjustments, none of which, would differ materially from
the notes to
the audited financial statements included in the Company's
applicable annual
report). Except as set
forth on Section 3.07(b) of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries have
any
Indebtedness.
(c)
Except as disclosed in Section 3.07(c) of the Company
Disclosure
Schedule, neither the Company nor any of its subsidiaries is
subject to any
liabilities or obligations of any kind or nature (whether accrued,
absolute,
contingent, determinable or otherwise), except (i) liabilities set
forth on
the face of the December 31, 2006 unaudited balance sheet included
in the
Company's report on Form 10-Q for the quarter ended December 31,
2006, (ii)
liabilities incurred in the ordinary course of business and
consistent with
past practice since December 31, 2006, (iii) liabilities incurred
in
connection with the Transactions and (iv) liabilities that have not
had and
would not reasonably be expected to have, individually or in the
aggregate, a
Company Material Adverse Effect.
(d)
Except as set forth in Section 3.07(d) of the Company
Disclosure
Schedule, none of the Company or any of its subsidiaries is
indebted to any
director or officer of the Company or any of its subsidiaries
(except for
amounts due as normal salaries and bonuses or in reimbursement of
ordinary
business expenses and directors' fees) and no such person is
indebted to the
Company or any of its subsidiaries, and there have been no other
transactions
of the type required to be disclosed pursuant to Items 402 or 404
of
Regulation S-K promulgated by the SEC other than those disclosed in
the SEC
Reports.
(e)
The Company has heretofore furnished or made available to Merger
Sub a
complete and correct copy of any amendments or modifications which
have not
yet been filed with the SEC to SEC Reports which previously have
been filed by
the Company with the SEC pursuant to the Securities Act and the
rules and
regulations promulgated thereunder or the Exchange Act and the
rules and
regulations promulgated thereunder.
3.08
Compliance with Applicable Laws. Except as set forth on Section
3.08
of the Company Disclosure Schedule and except in each case for
possible
violations which would not, individually or in the aggregate, have
a Company
Material Adverse Effect, (i) neither the Company nor any of its
subsidiaries
is in violation of any Order (as defined in Section 6.01(b)) of
any
Governmental Authority or any Law of any Governmental Authority
applicable to
the Company or any subsidiary of the Company or any of their
respective
properties or assets and (ii) the business operations of the
Company and its
subsidiaries have been conducted in compliance with all Laws of
each
Governmental Authority.
3.09
Absence of Certain Changes or Events. Except as set forth in Section
3.09 of the Company Disclosure Schedule or as contemplated by this
Agreement,
since December 31, 2006, the Company and its subsidiaries have
conducted their
businesses in all material respects only in the ordinary course of
business
and in a manner consistent with past practice in all material
respects and
there has not been:
(a)
any material change in any method of accounting or accounting
practice
by the Company or any of its subsidiaries, except for any such
change required
by reason of a concurrent change in United States generally
accepted
accounting principles;
(b)
any declaration, setting aside or payment of any dividend (whether
in
cash, stock or other property) or other distribution in respect of
the
Company's securities or any redemption, purchase or other
acquisition by the
Company of any of the Company's securities;
(c)
any issuance or the authorization of any issuance of any securities
in
respect of, in lieu of or in substitution for shares of its capital
stock;
(d)
any amendment of any material term of any outstanding security of
the
Company or any of its subsidiaries;
(e)
any issuance by the Company or any of its subsidiaries of any
notes,
bonds or other debt securities or any capital stock or other equity
securities
or any securities convertible, exchangeable or exercisable into any
capital
stock or other equity securities, except for (i) the granting of
Options and
(ii) the issuance of any Common Shares pursuant to the exercise of
any
Options;
(f)
any incurrence, assumption or guarantee by the Company or any of
its
subsidiaries of any Indebtedness;
(g)
any making of any loan, advance or capital contributions to or
investment in any entity or person, other than loans, advances or
capital
contributions to or investments in wholly owned subsidiaries;
(h)
any entry into any contract related to the acquisition or
disposition
of any business or any material assets, including any Company
Proprietary
Rights;
(i)
any effect, event or change that has had or is reasonably likely
to
have a Company Material Adverse Effect;
(j)
any material increase in the benefits under, or the
establishment,
material amendment or termination of, any Benefit Plan (as defined
in Section
3.13(b)) covering current or former employees, officers or
directors of the
Company or any of its subsidiaries, or any material increase in
the
compensation payable or to become payable to or any other material
change in
the employment terms for any directors or officers of the Company
or any of
its subsidiaries or any other employee earning noncontingent cash
compensation
in excess of $100,000 per year;
(k)
any entry by the Company or any of its subsidiaries into any
employment, consulting, severance, termination, change-of-control
or
indemnification agreement with any director or officer of the
Company or any
of its subsidiaries or entry into any such agreement with any
person for a
noncontingent cash amount in excess of $100,000 per year or outside
the
ordinary course of business; or
(l)
any authorization of, or agreement by the Company or any of its
subsidiaries to take, any of the actions described in this Section
3.09,
except as expressly contemplated by this Agreement.
3.10
Change of Control.
Section 3.10 of the Company Disclosure Schedule
sets forth the amount of any compensation or remuneration of any
kind or
nature which is or may become payable to any Employee (as defined
in Section
3.13(a)), in whole or in part, by reason of the execution and
delivery of this
Agreement or the consummation of the Transactions (the "Change of
Control
Payments").
3.11
Litigation. Section
3.11 of the Company Disclosure Schedule sets
forth, as of the date hereof, each suit, claim, action, proceeding
or
investigation pending or, to the knowledge of the Company,
threatened against
the Company or any of its subsidiaries, at law or in equity.
There is no
suit, claim, action, proceeding or investigation pending or, to the
knowledge
of the Company, threatened against the Company or any of its
subsidiaries, at
law or in equity, that, individually or in the aggregate, would
reasonably be
expected to have a Company Material Adverse Effect. As of the date hereof,
neither the Company nor any of its subsidiaries is subject to any
outstanding
order, writ, injunction or decree.
3.12
Information in Proxy Statement.
(a)
Each document required to be filed by the Company with the SEC
in
connection with the Transactions (the "Company Disclosure
Documents"),
including, without limitation, the proxy or information statement
of the
Company containing information required by Regulation 14A under the
Exchange
Act, and, if applicable, Rule 13e-3 and Schedule 13E-3 under the
Exchange Act
(together with all amendments and supplements thereto, the "Proxy
Statement"),
to be filed with the SEC in connection with the Merger, will, when
filed,
comply as to form in all material respects with the applicable
requirements of
the Exchange Act. The representations and warranties contained in
this Section
3.12(a) will not apply to statements or omissions included in the
Company
Disclosure Documents based upon information furnished to the
Company in
writing by Merger Sub or Parent or any of their representatives
specifically
for use therein.
(b)
At the time the Proxy Statement or any amendment or supplement
thereto
is first mailed to shareholders of the Company and at the time
such
shareholders vote on adoption of this Agreement and the Merger, the
Proxy
Statement, as supplemented or amended, if applicable, will not
contain any
untrue statement of a material fact or omit to state any material
fact
necessary in order to make the statements made therein, in the
light of the
circumstances under which they were made, not misleading. At the
time of the
filing of any Company Disclosure Document other than the Proxy
Statement and
at the time of any distribution thereof, such Company Disclosure
Document will
not contain any untrue statement of a material fact or omit to
state a
material fact necessary in order to make the statements made
therein, in the
light of the circumstances under which they were made, not
misleading. The
representations and warranties contained in this Section 3.12(b)
will not
apply to statements or omissions included in the Company Disclosure
Documents
based upon information furnished to the Company in writing by
Merger Sub or
Parent or any of their representatives specifically for use
therein.
3.13
Benefit Plans.
(a)
Except as disclosed in Section 3.13(a) of the Company
Disclosure
Schedule, there exist no employment, consulting, severance,
retention,
termination or change-of-control agreements, arrangements or
understandings
between the Company or any of its subsidiaries and any individual
current or
former employee, independent contractor, officer or director (or
any
dependent, beneficiary or relative of any of the foregoing) of the
Company or
any of its subsidiaries (collectively, the "Employees") with
respect to which
the annual cash, noncontingent payments thereunder exceed $100,000
or where
the contingent and noncontingent annual compensation is reasonably
likely to
exceed $150,000.
(b)
Section 3.13(b) of the
Company Disclosure Schedule contains a
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")) (collectively, the "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) other bonus, deferred compensation, severance pay,
pension,
profit-sharing, retirement, insurance, stock purchase, stock
option, vacation
pay, sick pay or other fringe benefit plan, arrangement or
practice
maintained, or contributed to, by the Company or any of its
subsidiaries for
the benefit of any of the Employees or with respect to which the
Company has
any liability (the foregoing clauses (i), (ii) and (iii)
collectively, the
"Benefit Plans"). The
Company has delivered to Merger Sub correct and
complete copies of (i) each Benefit Plan, (ii) the three most
recent annual
reports on Form 5500 filed with the Internal Revenue Service with
respect to
each Benefit Plan (and all attachments thereto), (iii) the most
recent summary
plan description for each Benefit Plan for which such summary plan
description
is required and (iv) each trust agreement and group annuity
contract relating
to any Benefit Plan.
(c)
Except as disclosed in Section 3.13(c) of the Company
Disclosure
Schedule, all Pension Plans intended to be qualified plans may
either rely on
opinion letters issued for the form of plan or have been the
subject of
favorable determination letters from the Internal Revenue Service
to the
effect that such Pension Plans are qualified and exempt from
Federal income
taxes under Section 401(a) and 501(a), respectively, of the Code
(taking into
account the laws commonly referred to as "GUST"), and no such
determination
letter has been revoked. There is no reasonable basis for
the revocation of
any such determination letter.
(d)
None of the Benefit Plans is, and none of the Company or any of
its
subsidiaries has 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 Section 302 of Title I
of ERISA
or Title IV of ERISA, (ii) a "multiple employer plan" (as such term
is defined
in ERISA), (iii) a Multiemployer Pension Plan or (iv) a funded
welfare benefit
plan (as such term is defined in Section 419 of the Code).
Each Benefit Plan
and all related trusts, insurance contracts and funds has been
maintained,
funded and administered in all material respects in accordance with
the terms
of such Benefit Plan and in compliance in all material respects
with the
applicable provisions of ERISA, the Code and other applicable laws.
There are
no unpaid contributions, premiums or other payments 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. None
of the Company or any of its subsidiaries has incurred
any liability or taken any action, and the Company does not have
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
Section 302
of Title I of ERISA 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) 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, or (iii) on account of unpaid
contributions to any
Multiemployer Pension Plan. Neither the Company nor any of its
subsidiaries
has any unfunded liabilities with respect to any deferred
compensation,
retirement or other Benefit Plan.
(e)
None of the Company nor any of its subsidiaries 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
respect to any Benefit Plan subject to ERISA that reasonably could
be expected
to subject the Company or any of its subsidiaries or any Employee
to (i) any
material tax or penalty on prohibited transactions imposed by
Section 4975 or
(ii) any liability under Section 502(i) or Section 502(l) of ERISA.
As of the
date of this Agreement, 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,
investigation,
inquiry or claim pending, other than routine claims for
benefits.
(f)
None of the Company or any of its subsidiaries has any obligation
to
provide any health benefits or other welfare benefits to retired or
other
former employees, except as specifically required by Part 6 of
Title I of
ERISA ("COBRA").
Except as disclosed in Section 3.13(f) of the Company
Disclosure Schedule, each Benefit Plan that provides health or
welfare
benefits is fully insured. Incurred but not reported claims
under each such
Benefit Plan that is not fully insured have been properly
accrued.
(g)
Neither the Benefit Plans nor any other arrangement obligates
the
Company or any of its subsidiaries to pay any separation,
severance,
termination or similar benefit, accelerate any vesting schedule, or
alter the
timing of any benefit payment, in whole or in part, as a result of
any
transaction contemplated by this Agreement or, in whole or in part,
as a
result of a change in control or ownership within the meaning of
any Benefit
Plan (or any other arrangement) or Section 280G of the Code.
(h)
Except as set forth in Section 3.13(h) of the Company
Disclosure
Schedule, no Benefit Plan is subject to Section 409A of the Code
(each such
plan required to be listed in Section 3.13(h) of the Company
Disclosure
Schedule, a "Deferred Compensation Plan"). Each Deferred Compensation
Plan
materially complies in good faith with Section 409A of the Code and
the
regulations issued thereunder as of the time of this Agreement.
Neither the
Company nor any of its subsidiaries has (i) granted to any person
an interest
in any Deferred Compensation Plan which interest has been or, upon
the lapse
of a substantial risk of forfeiture with respect to such interest,
will be
subject to the Tax imposed by Section 409A(a)(1)(B) or (b)(4)(A) of
the Code,
or (ii) materially modified the terms of any Deferred Compensation
Plan in a
manner that could cause an interest previously granted under such
plan to
become subject to the Tax imposed by Section 409A(a)(1)(B) or
(b)(4) of the
Code.
(i) Neither
the Company nor any subsidiary has any liability (potential
or otherwise) with respect to any "employee benefit plan" (as
defined in
Section 3(3) of ERISA) solely by reason of being treated as a
single employer
under Section 414 of the Code with any other entity.
3.14
Taxes.
(a)
Except as set forth in Section 3.14(a) of the Company
Disclosure
Schedule: (i) the Company and each of its subsidiaries has timely
filed or
caused to be filed all material Tax Returns required to be filed by
it, and
each such Tax Return has been prepared in substantial compliance
with all
applicable laws and regulations and is true and correct in all
material
respects; (ii) the Company and each of its subsidiaries has paid
(or the
Company has paid on behalf of its subsidiaries) all material Taxes
(as
hereinafter defined) required to be paid in respect of the periods
covered by
such returns and has made adequate provision in the Company's
financial
statements for payment of all material Taxes that have not been
paid, whether
or not shown as due and payable on any Tax Return, in respect of
all taxable
periods or portions thereof ending on or before the date of such
financial
statements; and (iii) neither the Company nor any of its
subsidiaries has
incurred any material liability for Taxes subsequent to the date of
the most
recent financial statements contained in the SEC Reports other than
in the
ordinary course of the Company's or such subsidiary's business.
(b)
Except as set forth in Section 3.14(b) of the Company
Disclosure
Schedule: (i) no material Tax Return of the Company or any of its
subsidiaries
is under audit or examination by any taxing authority, and no
written notice
of such an audit or examination or any other audit or examination
with respect
to material Taxes has been received by the Company or any of its
subsidiaries;
(ii) each material 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 United States generally accepted accounting
principles; (iii)
there are no material Liens for Taxes upon the assets of the
Company or any of
its subsidiaries, except Liens relating to current Taxes not yet
due and
payable or otherwise being contested in good faith as to which
appropriate
reserves have been established in the Company's financial
statements in
accordance with United States generally accepted accounting
principles; (iv)
all material Taxes which the Company or any of its subsidiaries are
required
by law to withhold or to collect for payment have been duly
withheld and
collected or are in the process of being withheld and collected;
(v) none of
the Company or any of its subsidiaries has consented to extend the
time in
which any Tax may be assessed or collected by any taxing authority;
and (vi)
to the knowledge of the Company, no written claim has been made by
any taxing
authority in a jurisdiction where the Company and its subsidiaries
do not file
Tax Returns that the Company or any of its subsidiaries is or may
be subject
to taxation in that jurisdiction, other than such claims which
would not
reasonably be expected to have a Company Material Adverse
Effect.
(c)
Except as set forth in Section 3.14(c) of the Company
Disclosure
Schedule, there is no Contract or other arrangement, plan or
agreement by or
with the Company or any of its subsidiaries covering any person
that,
individually or collectively, could give rise to the payment of any
amount by
the Company or any of its subsidiaries that would not be deductible
by the
Company or such subsidiary by reason of Sections 280G or 162(m) of
the Code
(or any corresponding provision of state, local or foreign law).
(d)
Except as set forth in Section 3.14(d) of the Company
Disclosure
Schedule, each of the Company and its subsidiaries has made
available to
Merger Sub and Parent true, correct and complete copies of all
material income
Tax Returns, and all examination reports and statements of
deficiencies
assessed against or agreed to by any of the Company or any of its
subsidiaries
that have been filed by or submitted to any of the Company or any
of its
subsidiaries for all taxable years not barred by the statute of
limitations.
(e)
Except as set forth in Section 3.14(e) of the Company
Disclosure
Schedule, none of the Company or any of its 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 or Tax sharing agreement with any
persons or
entity other than the Company and its subsidiaries, (iii) has any
liability
for the Taxes of any Person (other than any of the Company or any
of its
subsidiaries) under Treas. Reg. Section 1.1502-6 (or any similar
provision of
state, local or foreign law), as a transferee or successor, by
contract, or
otherwise or (iv) has any material liability for the Taxes of any
Person other
than the Company, the subsidiaries of the Company or in connection
with the
acquisition, directly or indirectly, of any Person acquired by the
Company or
any of its subsidiaries.
(f)
Except as set forth in Section 3.14(f) of the Company
Disclosure
Schedule, none of the Company or any of its subsidiaries 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
Closing
Date as a result of any (i) change in method of accounting for a
taxable
period ending on or prior to the Closing Date under Code Section
481(c) (or
any corresponding or similar provision of state, local or foreign
income Tax
Law); (ii) "closing agreement" as described in Code Section 7121
(or any
corresponding or similar provision of state, local or foreign
income Tax Law);
(iii) deferred intercompany gain or any excess loss account
described in
Treasury Regulations under Code Section 1502 (or any corresponding
or similar
provision of state, local or foreign income Tax Law); (iv)
installment sale
made prior to the Closing Date; or (v) repaid amount received on or
prior to
the Closing Date.
(g)
None of the Company or any of its subsidiaries has been a U.S.
real
property holding corporation within the meaning of Section
897(c)(2) of the
Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the
Code.
(h)
Except as set forth in Section 3.14(h) of the Company
Disclosure
Schedule, none of the Company or any of its subsidiaries has
distributed stock
of another Person, or had its stock distributed by another Person,
in a
transaction that was purported or intended to be governed in whole
or in part
by Code Sections 355 or 361.
(i)
As used in this Section 3.14, the terms (i) "Tax" (and, with
correlative meaning, "Taxes") means: (A) any federal, state, local
or foreign
net income, gross income, gross receipts, windfall profit,
severance,
property, production, sales, use, license, excise, franchise,
employment,
payroll, withholding, alternative or add-on minimum, ad valorem,
value added,
transfer, stamp or environmental tax, or any other tax of any kind
whatsoever,
together with any interest or penalty or addition to tax imposed by
any
Governmental Authority and (B) any liability of the Company or any
of its
subsidiaries for payments of a type described in clause (A) as a
result of (I)
any obligation of the Company or any of its subsidiaries under any
tax sharing
agreement or tax indemnity agreement or (II) the Company or any of
its
subsidiaries being a member of an affiliated group (other than one
of which
the Company is the parent); and (ii) "Tax Return" means any report,
return or
other information or document required to be supplied to or filed
with a
taxing authority in connection with Taxes.
3.15
Intellectual Property.
(a) Schedule
3.15(a) attached hereto sets forth a complete and correct
list of: (i) all patented or registered Proprietary Rights owned by
the
Company or its subsidiaries, including, without limitation,
Internet domain
name registrations; (ii) all pending patent applications or other
applications
for registration of Proprietary Rights owned by the Company or
its
subsidiaries and (iii) all trade names and corporate names used by
the Company
or its subsidiaries.
(b)
Other than commercially-available off-the-shelf software with a
total
replacement cost of less than $25,000, Schedule 3.15(b) attached
hereto sets
forth a complete and correct list of: (i) technology used in the
operations of
the Company or any of its subsidiaries for which the Company or
its
subsidiaries paid more than $10,000 in the aggregate in license
fees or pays
more than $5,000 in annual support fees; (ii) all other licenses or
similar
agreements or arrangements, in effect as of the date hereof, in
which the
Company or any of its subsidiaries is a licensee of Proprietary Rights; (iii)
other than customer contracts entered into in the ordinary course
of business,
all licenses or similar agreements or arrangements in which the
Company or any
of its subsidiaries is a licensor of Proprietary Rights, including,
without
limitation, reseller agreements; and (iv) all other agreements or
similar
arrangements, in effect as of the date hereof, relating to the use
of
Proprietary Rights by the Company or any of its subsidiaries.
(c)
The Company and its subsidiaries own and possess all right, title
and
interest in and to the registered Proprietary Rights set forth in
Schedule
3.15(a), have a valid and enforceable right to use pursuant to the
agreements
set forth in Schedule 3.15(b), and otherwise have the right to use
all other
Proprietary Rights necessary for the operation of the Company's and
each of
its subsidiaries businesses as currently conducted, free and clear
of all
Liens (collectively, the "Company Proprietary Rights").
(d)
Except as set forth on Schedule 3.15(d), (i) to the Company's
knowledge, neither the Company nor any of its subsidiaries has
infringed,
misappropriated and the operation of the Company's and each of
its
subsidiaries businesses as currently conducted do not infringe,
misappropriate, any Proprietary Rights of any third party; (ii)
neither the
Company nor any of its subsidiaries are aware of any facts which
indicate a
likelihood of any of the foregoing; and (iii) neither the Company
nor any of
its subsidiaries has received any notices regarding any of the
foregoing
(including, without limitation, any demands or offers to license
any
Proprietary Rights from any third party or any requests for
indemnification
from customers).
(e)
Except as set forth on Schedule 3.15(e), (i) no loss or expiration
of
any of the Company Proprietary Rights is threatened, pending or
reasonably
foreseeable, except for patents expiring at the end of their
statutory terms
(and not as a result of any act or omission by the Company); (ii)
all
registrations for (and applications for registration of) Company
Proprietary
Rights are valid and enforceable; (iii) no claim by any third party
contesting
the validity, enforceability, use or ownership of any of the
Company
Proprietary Rights has been made, is currently outstanding or is to
the
Knowledge of the Company threatened, and there are no grounds for
the same;
(iv) the Company and its subsidiaries have taken all commercially
reasonable
action to maintain and protect all of the Company Proprietary
Rights and will
continue to maintain and protect all of the Company Proprietary
Rights prior
to the Closing so as not to adversely affect the validity or
enforceability
thereof; (v) neither the Company nor its subsidiaries has disclosed
or allowed
to be disclosed any of its trade secrets or confidential
information to any
third party and (vi) to the Company's knowledge, no third party has
infringed,
misappropriated, diluted or otherwise conflicted with any of the
Company
Proprietary Rights and neither the Company nor any of its
subsidiaries is
aware of any facts that indicate a likelihood of any of the
foregoing.
(f)
To the Company's knowledge, the Company's proprietary software
(the
"Company Software") does not contain any open source or freeware
and the sale
or licensing of the Company Software in the ordinary course of
business is not
governed, in whole or in part, by the terms of the GNU General
Public License
or any other license requiring the Company or any of its
subsidiaries to
disclose source code to any of the Company Software and any other
software for
which a reasonably prudent Person would hold in confidence.
The computer
software, computer firmware, computer hardware (whether general
purpose or
special purpose), and other similar or related items of
automated,
computerized and/or software system(s) that are used or relied on
by the
Company and its subsidiaries in the conduct of its business is
sufficient in
all material respects for the cu
