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Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
dated as of
October 1, 2007
among
PRINTRONIX, INC.,
PIONEER HOLDING CORP.
and
PIONEER SUB CORP.
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TABLE OF CONTENTS
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PAGE
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ARTICLE 1
DEFINITIONS....................................................
1
Section 1.01.
Definitions............................................... 1
ARTICLE 2 THE
MERGER..................................................... 8
Section 2.01. The
Merger................................................ 8
Section 2.02. Conversion of
Shares...................................... 8
Section 2.03. Surrender and
Payment..................................... 9
Section 2.04. Dissenting
Shares......................................... 10
Section 2.05. Stock Options; Restricted
Stock........................... 10
Section 2.06.
Adjustments............................................... 11
Section 2.07. Withholding
Rights........................................ 11
Section 2.08. Lost
Certificates......................................... 11
ARTICLE 3 THE SURVIVING
CORPORATION...................................... 11
Section 3.01. Certificate of
Incorporation.............................. 11
Section 3.02.
Bylaws.................................................... 12
Section 3.03. Directors and
Officers.................................... 12
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE
COMPANY.................. 12
Section 4.01. Corporate Existence and
Power............................. 12
Section 4.02. Corporate
Authorization................................... 12
Section 4.03. Governmental
Authorization................................ 13
Section 4.04.
Non-contravention......................................... 13
Section 4.05.
Capitalization............................................ 13
Section 4.06.
Subsidiaries.............................................. 15
Section 4.07. SEC Filings and the Sarbanes-Oxley
Act.................... 15
Section 4.08. Financial
Statements...................................... 17
Section 4.09. Disclosure
Documents...................................... 17
Section 4.10. Absence of Certain
Changes................................ 17
Section 4.11. No Undisclosed Material
Liabilities....................... 19
Section 4.12. Compliance with Laws;
Permits............................. 20
Section 4.13.
Litigation................................................ 20
Section 4.14. Finders' Fees;
Expenses................................... 20
Section 4.15. Opinion of Financial
Advisor.............................. 20
Section 4.16.
Taxes..................................................... 21
Section 4.17. Employee Benefit
Plans.................................... 22
Section 4.18. Environmental
Matters..................................... 25
Section 4.19. Material
Contracts........................................ 26
Section 4.20. Insurance
Policies........................................ 28
Section 4.21. Intellectual
Property..................................... 29
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Section 4.22.
Products.................................................. 31
Section 4.23.
Properties................................................ 31
Section 4.24. Certain Business
Practices................................ 32
Section 4.25. Interested Party
Transactions............................. 32
Section 4.26. Antitakeover Statutes and Rights
Agreement................ 33
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF PARENT AND
MERGER
SUBSIDIARY............................................................
33
Section 5.01. Corporate Existence and
Power............................. 33
Section 5.02. Corporate
Authorization................................... 33
Section 5.03. Governmental
Authorization................................ 34
Section 5.04.
Non-contravention......................................... 34
Section 5.05. Absence Of
Litigation..................................... 34
Section 5.06.
Financing................................................. 34
Section 5.07. Limited
Guarantee......................................... 35
Section 5.08. Disclosure
Documents...................................... 35
Section 5.09. Antitakeover
Statutes..................................... 35
ARTICLE 6 COVENANTS OF THE
COMPANY....................................... 35
Section 6.01. Conduct of the
Company.................................... 35
Section 6.02. Stockholder Meeting; Proxy
Material....................... 38
Section 6.03. No Solicitation; Other
Offers............................. 38
Section 6.04.
Financing................................................. 40
Section 6.05. Exemption from Liability Under Section
16................. 41
Section 6.06. Stockholder
Litigation....................................
ARTICLE 7 COVENANTS OF
PARENT............................................ 41
Section 7.01. Obligations of Merger
Subsidiary.......................... 41
Section 7.02. Voting of
Shares.......................................... 41
Section 7.03. Information For Proxy
Statement........................... 41
Section 7.04. Director and Officer
Liability............................ 41
Section 7.05. Employee Benefits; 401(k)
Plan............................ 43
Section 7.06. Financing
Commitments..................................... 43
Section 7.07. Solvency of the Surviving
Corporation..................... 43
ARTICLE 8 COVENANTS OF PARENT, MERGER SUBSIDIARY AND THE
COMPANY......... 44
Section 8.01. Commercially Reasonable
Efforts........................... 44
Section 8.02. Certain
Filings........................................... 44
Section 8.03. Public
Announcements...................................... 45
Section 8.04. Further
Assurances........................................ 45
Section 8.05. Access to
Information..................................... 45
Section 8.06. Notices of Certain
Events................................. 45
Section 8.07.
Delisting................................................. 46
Section 8.08.
Litigation................................................ 46
Section 8.09. Environmental
Reports..................................... 46
Section 8.10. Working Capital
Statements................................ 47
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ARTICLE 9 CONDITIONS TO THE
MERGER....................................... 47
Section 9.01. Conditions to the Obligations of Each
Party............... 47
Section 9.02. Conditions to the Obligations of Parent and
Merger
Subsidiary............................................. 48
Section 9.03. Conditions to the Obligations of the
Company.............. 49
ARTICLE 10
TERMINATION...................................................
50
Section 10.01.
Termination............................................... 50
Section 10.02. Effect of
Termination..................................... 51
ARTICLE 11
MISCELLANEOUS.................................................
51
Section 11.01.
Notices................................................... 51
Section 11.02. Survival of Representations and
Warranties................ 52
Section 11.03. Amendments and
Waivers.................................... 52
Section 11.04. Expenses; Termination
Fee................................. 53
Section 11.05. Binding Effect; Benefit;
Assignment....................... 54
Section 11.06. Governing
Law............................................. 54
Section 11.07.
Jurisdiction.............................................. 55
Section 11.08. WAIVER OF JURY
TRIAL...................................... 55
Section 11.09. Counterparts;
Effectiveness............................... 55
Section 11.10. Entire
Agreement.......................................... 55
Section 11.11.
Severability.............................................. 55
Section 11.12. Specific
Performance...................................... 55
Section 11.13.
Interpretation............................................ 56
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EXHIBIT
EXHIBIT A - Form of Voting Agreement
EXHIBIT B- Certificate of Incorporation of the Surviving
Corporation
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") dated as of
October 1, 2007
among Printronix, Inc., a Delaware corporation (the "COMPANY"),
Pioneer Holding
Corp., a Delaware corporation ("PARENT"), and Pioneer Sub Corp.,
a Delaware
corporation and a wholly-owned subsidiary of Parent ("MERGER
SUBSIDIARY").
WHEREAS, the respective boards of directors of the Company,
Parent and
Merger Sub have approved and adopted this Agreement and the
transactions
contemplated hereby and deem them to be advisable and in the
best interest of
their respective stockholders;
WHEREAS, the Special Committee of the Company (as defined
herein) has
approved this Agreement and the transactions contemplated hereby
and deem them
to be advisable and in the best interest of the Company's
stockholders;
WHEREAS, immediately prior to the Effective Time, certain member
of the
Company's management (the "CONTINUING STOCKHOLDERS") will
contribute shares of
the Company's common stock owned by them (the "CONTRIBUTED
STOCK") to Parent in
exchange for shares of capital stock of Parent;
WHEREAS, concurrently with the execution and delivery of this
Agreement,
each of the directors, in their capacity as stockholders, and
executive officers
of the Company have entered into voting agreements in the form
attached as
Exhibit A hereto (the "VOTING AGREEMENTS"); and
WHEREAS, concurrently with the execution of this Agreement, and
as a
condition to the willingness of the Company to enter into this
Agreement, Vector
Capital Partners IV, L.P. (the "GUARANTOR") has entered into a
limited guarantee
(the "LIMITED GUARANTEE") in the form of Annex A hereto in favor
of the Company
pursuant to which Guarantor has, among other matters, and
subject to the terms
thereof, guaranteed certain obligations of Parent and Merger Sub
in connection
with this Agreement.
NOW, THEREFORE, in consideration of the representations,
warranties and
covenants in this Agreement, and intending to be legally bound
hereby, Parent,
the Company and Merger Sub hereby agree as follows:
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.01. Definitions. (a) As used herein, the following
terms have the
following meanings:
"ACQUISITION PROPOSAL" means, other than the transactions
contemplated by
this Agreement, any offer, proposal or inquiry from a Third
Party relating to,
or that could reasonably be expected to lead to, or any Third
Party indication
of interest in, (A) any acquisition or purchase, direct or
indirect, in one or a
series of transactions, of assets or businesses that constitute
15% or more of
the consolidated revenue, net income, EBITDA or assets of the
Company and its
Subsidiaries or over 15% of any class of equity or voting
securities of the
Company or any of its Subsidiaries whose assets, individually or
in the
aggregate, constitute more than 15% of the consolidated revenue,
net
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income, EBITDA or assets of the Company and its Subsidiaries,
(B) any tender
offer (including a self-tender offer) or exchange offer that, if
consummated,
would result in a Third Party beneficially owning 15% or more of
any class of
equity or voting securities of the Company or any of its
Subsidiaries whose
assets, individually or in the aggregate, constitute more than
15% of the
consolidated revenue, net income, EBITDA or assets of the
Company and its
Subsidiaries, or (C) a merger, consolidation, share exchange,
business
combination, sale of substantially all the assets,
reorganization,
recapitalization, liquidation, dissolution, joint venture,
license agreement or
other similar transaction involving the Company or any of its
Subsidiaries whose
assets, individually or in the aggregate, constitute more than
15% of the
consolidated revenue, net income, EBITDA or assets of the
Company and its
Subsidiaries.
"AFFILIATE" means, with respect to any Person, any other Person
directly or
indirectly controlling, controlled by, or under common control
with such Person.
"APPLICABLE LAW" means, with respect to any Person, any civil
and criminal,
foreign, international, European Union, provincial, federal,
state or local law
(statutory, common or otherwise), constitution, treaty,
convention, ordinance,
code, rule, regulation, order, injunction, judgment, decree,
ruling, writ or
other similar requirement enacted, adopted, promulgated or
applied by a
Governmental Authority that is binding upon or applicable to
such Person, as
amended unless expressly specified otherwise.
"BUSINESS DAY" means a day, other than Saturday, Sunday or other
day on
which commercial banks in New York, New York or San Francisco,
California are
authorized or required by Applicable Law to close.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY BALANCE SHEET" means the consolidated balance sheet of
the Company
as of June 29, 2007 and the footnotes thereto set forth in the
Company 10-Q.
"COMPANY BALANCE SHEET DATE" means June 29, 2007.
"COMPANY DISCLOSURE SCHEDULE" means the disclosure schedule
dated the date
hereof regarding this Agreement that has been provided by the
Company to Parent
and Merger Subsidiary.
"COMPANY IP" means all Intellectual Property Rights used in the
conduct of
the Company's or its Subsidiaries' businesses as currently
conducted, or as
currently contemplated to be conducted.
"COMPANY OWNED IP" means all Intellectual Property Rights owned,
purported
to be owed, developed or acquired by assignment, or exclusively
licensed, by the
Company and/or its Subsidiaries.
"COMPANY RIGHTS" means the Company Stock purchase rights issued
pursuant to
the Company Rights Agreement.
"COMPANY RIGHTS AGREEMENT" means the Company's Amended and
Restated Rights
Agreement dated as of April 4, 1999.
"COMPANY STOCK" means the common stock, $0.01 par value, of the
Company.
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"COMPANY 10-K" means the Company's annual report on Form 10-K
for the
fiscal year ended March 31, 2007.
"COMPANY 10-Q" means the Company's quarterly report on Form 10-Q
for the
quarterly period ended June 29, 2007.
"COMPANY TRANSACTION COSTS" means all fees and expenses incurred
by the
Company and its Subsidiaries in connection with the transactions
contemplated by
this Agreement, including without limitation amounts payable to
Houlihan Lokey
Howard & Zukin Capital, Inc. and Houlihan Lokey Howard &
Zukin Financial
Advisors, Inc., amounts payable to the Company's outside
counsel, accountants
and other advisors and service providers, and amounts payable to
printers in
connection with the preparation, printing and mailing of the
Company Proxy
Statement.
"CONTRACT" means any legally binding written or oral contract,
agreement,
note, bond, indenture, mortgage, guarantee, option, lease,
license, sales or
purchase order, warranty, commitment or other instrument of any
kind.
"CURRENT ASSETS" shall have the same meaning as provided for in
the Company
10-K, which includes cash and cash equivalents, short-term
investments, accounts
receivable net of allowances for doubtful accounts and sales
returns, inventory,
prepaid expenses and other current assets, and net deferred
income tax assets.
"CURRENT LIABILITIES" shall have the same meaning as provided
for in the
Company 10-K, which includes current portion of long-term debt,
accounts
payable, accrued liabilities, payroll and employee benefits,
warranties,
deferred revenue, professional fees, income taxes, and other
liabilities. For
the purposes of this Agreement, Current Liabilities shall
exclude the Company
Transaction Costs.
"CURRENT SITES" shall mean the Company's current manufacturing
facilities
in California, the Netherlands, Mexico and Singapore.
"DELAWARE LAW" means the General Corporation Law of the State of
Delaware.
"ENVIRONMENTAL CONSULTANTS" shall mean (a) for all Current Sites
other than
California, ENVIRON International Corporation and (b) for the
current California
Company manufacturing facility, the technical consultant
retained by the
Potential Mortgage Lender.
"ENVIRONMENTAL LAWS" means all civil and criminal, foreign,
international,
European Union, provincial, federal, state and local laws
(statutory, common or
otherwise), constitutions, treaties, conventions, ordinances,
codes, rules,
regulations, orders, injunctions, judgments, decrees, rulings,
writs or other
similar requirements, in effect where business of the Company or
its
Subsidiaries currently is conducted any of which govern or
relate to pollution,
protection or restoration of the environment, natural resources,
safety and
health, releases or threatened releases of Hazardous Substances,
solid or
hazardous waste, or otherwise relating to the manufacture,
processing,
distribution, use, treatment, storage, release, transport or
handling of
Hazardous Substances and all laws and regulations with regard to
record keeping,
notification, disclosure and reporting requirements respecting
Hazardous
Substances, together with any Governmental Authority
interpretations of each of
the foregoing, including, but not limited to (i) the
Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C.
Section 9601 et
seq., and any
3
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amendments thereto; (ii) the Resource Conservation and Recovery
Act, 42 U.S.C.
Section 6901 et seq., and any amendments thereto; (iii) the
Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801 et seq.; (iv) any
other similar Laws,
as now in effect, relating to, or imposing liability or
standards of conduct
concerning, any Hazardous Materials or dangerous waste,
substance or material;
and (v) any Laws relating to the protection of human health and
occupational
safety for employees and others in the workplace.
"ENVIRONMENTAL PERMITS" means all Permits relating to or
required by
Environmental Laws and affecting, or relating to, the business
of the Company or
any Subsidiary as currently conducted.
"ERISA" means the Employee Retirement Income Security Act of
1974.
"ERISA AFFILIATE" of any entity means any other entity that,
together with
such entity, would be treated as a single employer under Section
414 of the
Code.
"FREELY AVAILABLE CASH" shall mean unrestricted cash on hand of
the Company
held in the account set forth on Schedule A less the Company
Transaction Costs.
"Freely Available Cash" shall exclude any cash that cannot be
deposited with the
Exchange Agent pursuant to Section 2.03 under Applicable Law
(including laws
relating to solvency, adequate surplus and similar capital
adequacy tests) or
under any Contract binding upon the Company or any of its
Subsidiaries or any
Permits affecting, or relating in any way to, the assets or
business of the
Company and its Subsidiaries.
"GAAP" means generally accepted accounting principles in the
United States.
"GOVERNMENTAL AUTHORITY" means any transnational, domestic or
foreign
federal, state or local, governmental authority, department,
court, agency or
official, including any political subdivision thereof.
"HAZARDOUS SUBSTANCE" means any pollutant, contaminant, waste or
chemical
or any toxic, radioactive, ignitable, corrosive, reactive or
otherwise hazardous
substance, waste or material, or any substance, waste or
material having any
constituent elements displaying any of the foregoing
characteristics, including
any substance, waste or material regulated under any Applicable
Law.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976,
as amended.
"INTELLECTUAL PROPERTY RIGHTS" means all worldwide rights in
(i)
inventions, whether or not patentable, (ii) patents and patent
applications,
(iii) trademarks, service marks, trade dress, logos, Internet
domain names and
trade names, whether or not registered, and all goodwill
associated therewith,
(iv) rights of publicity and other rights to use the names and
likeness of
individuals, (v) mask works, (vi) computer software, data,
databases, files, and
documentation and other materials related to the foregoing,
(vii) trade secrets
and confidential, technical and business information, (viii) any
other similar
type of proprietary intellectual property right, (ix) all rights
to any of the
foregoing provided by bilateral or international treaties or
conventions, (x)
all other intellectual property or proprietary rights and (xi)
all rights to sue
or recover and retain damages and costs and attorneys' fees for
past, present
and future infringement or misappropriation of any of the
foregoing.
"KNOWLEDGE" of any Person that is not an individual means the
actual
knowledge of such Person's executive officers after reasonable
inquiry.
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"LIEN" means, with respect to any property or asset, any
mortgage, lien,
pledge, charge, security interest, encumbrance or other adverse
claim of any
kind in respect of such property or asset. For purposes of this
Agreement, a
Person shall be deemed to own subject to a Lien any property or
asset that it
has acquired or holds subject to the interest of a vendor or
lessor under any
conditional sale agreement, capital lease or other title
retention agreement
relating to such property or asset.
"MATERIAL ADVERSE EFFECT" means, with respect to any Person
(other than
Parent and Merger Subsidiary), any state of facts, change,
development, event,
effect, condition, occurrence, action or omission that,
individually or in the
aggregate, could reasonably be expected to result in a material
adverse effect
on (i) the condition (financial or otherwise), business, assets,
properties or
results of operations of such Person and its Subsidiaries, taken
as a whole, or
(ii) the ability of such Person to perform its obligations under
or to
consummate the transactions contemplated by this Agreement,
except, in the case
of clause (i), any effect resulting from or arising in
connection with (A) this
announcement or pendency of this Agreement or the transactions
contemplated
hereby, (B) changes, circumstances or conditions affecting the
industry in which
the Company and its Subsidiaries operate, to the extent they do
not
disproportionately affect the Company or its Subsidiaries, taken
as a whole, (C)
any change in the Company's stock price or trading volume, in
and of itself (it
being understood that the underlying cause of any such change
may be taken into
consideration in determining whether a Material Adverse Effect
has occurred or
could reasonably be expected to occur), (D) any failure by the
Company to meet
internal or third party published revenue or earnings
projections, in and of
itself (it being understood that the underlying cause of any
such failure may be
taken into consideration in determining whether a Material
Adverse Effect has
occurred or could reasonably be expected to occur), (E) changes
in general U.S.
or global economic, regulatory or political conditions, to the
extent they do
not disproportionately affect the Company or its Subsidiaries,
taken as a whole,
(F) any changes or effects arising out of or resulting from any
legal claims or
other proceedings made by any of the Company's stockholders
arising out of or
related to this Agreement, the Merger or any other transaction
contemplated
hereby, or (G) potential costs of remediation, claims,
violations, damages,
losses or diminutions of property value identified and
quantified in the
Environmental Reports with respect to the Current Sites.
"1933 ACT" means the Securities Act of 1933.
"1934 ACT" means the Securities Exchange Act of 1934.
"PARENT MATERIAL ADVERSE EFFECT" means, with respect to the
Parent, any
state of facts, change, development, event, effect, condition,
occurrence,
action or omission that, individually or in the aggregate, could
reasonably be
expected to result in a material adverse effect on the ability
of Parent to
perform its obligations under or to consummate the transactions
contemplated by
this Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERMIT" means any permit, license, franchise, certificate,
consent,
approval and other similar authorization of any Governmental
Authority.
"PERSON" means an individual, corporation, partnership, limited
liability
company, association, trust or other entity or organization,
including a
government or political subdivision or an agency or
instrumentality thereof.
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"POTENTIAL MORTGAGE LENDER" shall mean Wells Fargo or any other
bank that
may provide mortgage financing to Parent.
"PUBLIC SOFTWARE" means any software that contains, or is
derived in any
manner (in whole or in part) from, any software that is
distributed as free
software or open source software (e.g., Linux), including
software licensed or
distributed under any of the following licenses or distribution
models: (A)
GNU's General Public License (GPL) or Lesser/Library GPL (LGPL),
(B) the
Artistic License (e.g., PERL), (C) the Mozilla Public License,
(D) the Netscape
Public License, (E) the Sun Community Source License (SCSL), (F)
the Sun
Industry Standards License (SISL), (G) the BSD License, and (H)
the Apache
License.
"REGISTERED IP" means all U.S., international and foreign (i)
patents and
patent applications (including provisional applications and
design patents and
applications) and all reissues, divisions, divisionals,
renewals, extensions,
counterparts, continuations and continuations-in-part thereof,
and all patents,
applications, documents and filings claiming priority thereto or
serving as a
basis for priority thereof, (ii) registered trademarks, service
marks,
applications to register trademarks, applications to register
service marks,
intent-to-use applications, or other registrations or
applications related to
trademarks, (iii) registered copyrights and applications for
copyright
registration, (iv) domain name registrations and Internet number
assignments;
and (v) other Intellectual Property Rights that are the subject
of an
application, certificate, filing, registration or other document
issued, filed
with, or recorded by any Governmental Authority, in the case of
each of clauses
(i)-(v) above, owned by, under obligation of assignment to, or
filed in the name
of, the Company or any of its Subsidiaries.
"SARBANES-OXLEY ACT" means the Sarbanes-Oxley Act of 2002.
"SEC" means the Securities and Exchange Commission.
"SUBSIDIARY" means, with respect to any Person, any entity of
which
securities or other ownership interests having ordinary voting
power to elect a
majority of the board of directors or other persons performing
similar functions
are at any time directly or indirectly owned by such Person.
"THIRD PARTY" means any Person, including as defined in Section
13(d) of
the 1934 Act, other than Parent or any of its Affiliates.
"WORKING CAPITAL" means Current Assets less Current
Liabilities.
(b) Each of the following terms is defined in the Section set
forth
opposite such term:
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TERM SECTION
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1994 Plan 4.05
2005 Plan 4.05
Additional Report Notice 8.09
Adverse Recommendation Change 6.03
Agreement Preamble
Certificates 2.03
Company Preamble
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TERM SECTION
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Company Board Recommendation 4.02
Company Cash Deposit 2.03
Company Payment Event 11.04
Company Proxy Materials 4.09
Company Proxy Statement 4.09
Company SEC Documents 4.07
Company Securities 4.05
Company Stockholder Approval 4.02
Company Stockholder Meeting 6.02
Company Stock Option 2.05
Company Stock Option Plans 4.05
Company Subsidiary Securities 4.06
Confidentiality Agreement 6.03
Continuing Stockholders Preamble
Contributed Stock Preamble
Current Sites 8.09
Debt Commitment Letter 5.06
Debt Financing 5.06
Effective Time 2.01
Employee Plans 4.17
End Date 10.01
Environmental Reports 8.09
Equity Commitment Letter 5.06
Exchange Agent 2.03
FASB 6.01
Financing 5.06
Financing Commitments 5.06
Guarantor Recitals
Indebtedness 4.05
Indemnified Person 7.04
internal controls 4.07
Leased Real Property 4.23
Limited Guarantee Recitals
Major Supplier 4.19
Major Supplier 4.19
Material Contract 4.19
Merger 2.01
Merger Consideration 2.02
Merger Subsidiary Preamble
Multiemployer Plan 4.17
Necessary IP Rights 4.21
New Financing Commitments 7.06
Notice Date 8.09
Owned Real Property 4.23
Parent Preamble
Parent Environmental Termination Notice 8.09
Parent Parties 11.04(d)
Parent Payment Event 11.04
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TERM SECTION
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Parent Termination Fee 11.04
Phase I Environmental Site Assessment 8.09
Proceedings 4.13
Qualified Plan 4.17
Significant Environmental Matter 8.09
Special Committee 4.02
Solvency Opinion 7.12
Superior Proposal 6.03
Surviving Corporation 2.01
Tax 4.16
Taxing Authority 4.16
Tax Return 4.16
Tax Sharing Agreements 4.16
Uncertificated Shares 2.03
Voting Agreements Recitals
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ARTICLE 2
THE MERGER
Section 2.01. The Merger. (a) Subject to the terms and
conditions of this
Agreement, at the Effective Time, Merger Subsidiary shall be
merged (the
"MERGER") with and into the Company in accordance with Delaware
Law, whereupon
the separate existence of Merger Subsidiary shall cease, and the
Company shall
be the surviving corporation (the "SURVIVING CORPORATION").
(b) As soon as practicable, but in no event later than three
(3)
Business Days following the satisfaction or, to the extent
permitted hereunder,
waiver of all conditions to the Merger set forth in Article 9
(other than
delivery of items to be delivered at the Closing and other than
satisfaction of
those conditions that by their nature are to be satisfied at the
Closing, it
being understood that the occurrence of the Closing shall remain
subject to the
delivery of such items and the satisfaction or waiver of such
conditions at the
Closing), the Company and Merger Subsidiary shall file a
certificate of merger
with the Delaware Secretary of State and make all other filings
or recordings
required by Delaware Law in connection with the Merger. The
Merger shall become
effective at such time (the "EFFECTIVE TIME") as the certificate
of merger is
duly filed with the Delaware Secretary of State (or at such
later time as may be
specified in the certificate of merger). The closing of the
Merger shall take
place at 11:00 a.m. on the date of the Effective Time at the
offices of
O'Melveny & Myers LLP, 275 Battery Street, Suite 2600, San
Francisco, California
94111, unless another time, date and/or place is agreed to in
writing by Merger
Subsidiary and the Company.
(c) From and after the Effective Time, the Surviving Corporation
shall
possess all the rights, powers, privileges and franchises and be
subject to all
of the obligations, liabilities, restrictions and disabilities
of the Company
and Merger Subsidiary, all as provided under Delaware Law.
Section 2.02. Conversion of Shares. At the Effective Time, by
virtue of the
Merger and without any action on the part of any Person,
8
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(a) except as otherwise provided in Section 2.02(b), Section
2.02(c)
or Section 2.04, each share of Company Stock (including the
associated Company
Rights) outstanding immediately prior to the Effective Time
shall be shall be
converted into the right to receive an amount in cash per share,
without
interest, equal to $16.00 (the "MERGER CONSIDERATION");
(b) each share of Company Stock held by the Company as treasury
stock
or owned by Parent (including the Contributed Stock) or Merger
Subsidiary
immediately prior to the Effective Time shall be cancelled, and
retired without
payment of any consideration therefor;
(c) each share of Company Stock held by any Subsidiary of the
Company
immediately prior to the Effective Time shall be converted into
such number of
shares of stock of the Surviving Corporation such that each such
Subsidiary owns
the same percentage of the Surviving Corporation immediately
following the
Effective Time as such Subsidiary owned in the Company
immediately prior to the
Effective Time; and
(d) each share of common stock of Merger Subsidiary
outstanding
immediately prior to the Effective Time shall be converted into
and become one
share of common stock of the Surviving Corporation with the same
rights, powers
and privileges as the shares so converted and shall constitute
the only
outstanding shares of capital stock of the Surviving
Corporation.
Section 2.03. Surrender and Payment. (a) Prior to the Effective
Time,
Parent shall appoint an agent (the "EXCHANGE AGENT") reasonably
satisfactory to
the Company for the purpose of exchanging for the Merger
Consideration (i)
certificates representing shares of Company Stock (the
"CERTIFICATES") or (ii)
uncertificated shares of Company Stock (the "UNCERTIFICATED
SHARES").
Immediately prior to the Effective Time, the Company shall
deposit $18 million
in cash (the "COMPANY CASH DEPOSIT") with the Exchange Agent.
The Company Cash
Deposit shall be made solely out of Freely Available Cash and
shall be used
solely for purposes of paying a portion of the Merger
Consideration in
accordance with this Article 2 and shall not be used to satisfy
any other
obligation of the Company or any of its Subsidiaries. At or
immediately
following the Effective Time, Parent shall make available to the
Exchange Agent
cash, for the benefit of the holders of Certificates and
Uncertificated Shares,
in an amount sufficient to pay all remaining aggregate Merger
Consideration in
excess of the Company Cash Deposit. Promptly after the Effective
Time (but,
subject to receipt by the Exchange Agent of the necessary
stockholder records
from the Company's transfer agent, in no event more than ten
(10) Business Days
after the Effective Time), Parent shall send, or shall cause the
Exchange Agent
to send, to each holder of shares of Company Stock at the
Effective Time a
letter of transmittal and instructions (which shall specify that
the delivery
shall be effected, and risk of loss and title shall pass, only
upon proper
delivery of the Certificates or transfer of the Uncertificated
Shares to the
Exchange Agent) for use in such exchange. The parties hereby
acknowledge and
agree that the ten (10)-Business Day period set forth in the
previous sentence
will be tolled for each Business Day the Exchange Agent has not
received the
necessary stockholder records from the Company's transfer
agent.
(b) Each holder of shares of Company Stock that have been
converted into
the right to receive the Merger Consideration shall be entitled
to receive, upon
(i) surrender to the Exchange Agent of a Certificate, together
with a properly
completed letter of transmittal, or (ii) receipt of an "agent's
message" by the
Exchange Agent (or such other evidence, if any, of transfer as
the Exchange
Agent may reasonably request) in the case of a book-entry
transfer of
Uncertificated Shares, together with a properly completed letter
of transmittal,
the Merger Consideration in respect of the Company Stock
represented by a
Certificate or Uncertificated Share.
9
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Until so surrendered or transferred, as the case may be, each
such Certificate
or Uncertificated Share shall represent after the Effective Time
for all
purposes only the right to receive such Merger
Consideration.
(c) If any portion of the Merger Consideration is to be paid to
a
Person other than the Person in whose name the surrendered
Certificate or the
transferred Uncertificated Share is registered, it shall be a
condition to such
payment that (i) either such Certificate shall be properly
endorsed or shall
otherwise be in proper form for transfer or such Uncertificated
Share shall be
properly transferred and (ii) the Person requesting such payment
shall pay to
the Exchange Agent any transfer or other taxes required as a
result of such
payment to a Person other than the registered holder of such
Certificate or
Uncertificated Share or establish to the satisfaction of the
Exchange Agent that
such tax has been paid or is not payable.
(d) After the Effective Time, there shall be no further
registration
of transfers of shares of Company Stock. If, after the Effective
Time,
Certificates or Uncertificated Shares are presented to the
Surviving
Corporation, they shall be canceled and exchanged for the Merger
Consideration
provided for, and in accordance with the procedures set forth,
in this Article
2.
(e) Any portion of the Merger Consideration made available to
the
Exchange Agent pursuant to Section 2.03(a) that remains
unclaimed by the holders
of shares of Company Stock nine (9) months after the Effective
Time shall be
returned to the Surviving Corporation, upon demand, and any such
holder who has
not exchanged shares of Company Stock for the Merger
Consideration in accordance
with this Section 2.03 prior to that time shall thereafter look
only to the
Surviving Corporation for payment of the Merger Considerations
in respect of
such shares without any interest thereon. Notwithstanding the
foregoing, neither
Parent, the Surviving Corporation or the Exchange Agent shall be
liable to any
holder of shares of Company Stock for any amounts paid to a
public official
pursuant to applicable abandoned property, escheat or similar
laws.
(f) Any portion of the Merger Consideration made available to
the
Exchange Agent pursuant to Section 2.03(a) to pay for shares of
Company Stock
for which appraisal rights have been perfected shall be returned
to the
Surviving Corporation upon demand.
Section 2.04. Dissenting Shares. Notwithstanding Section 2.03,
shares of
Company Stock outstanding immediately prior to the Effective
Time and held by a
holder who has not voted in favor of the Merger or consented
thereto in writing
and who has demanded appraisal for such shares of Company Stock
in accordance
with Delaware Law shall not be converted into a right to receive
the Merger
Consideration, unless such holder fails to perfect, withdraws or
otherwise loses
the right to appraisal. If, after the Effective Time, such
holder fails to
perfect, withdraws or loses the right to appraisal, such shares
of Company Stock
shall be treated as if they had been converted as of the
Effective Time into a
right to receive the Merger Consideration. The Company shall
give Parent prompt
notice of any demands received by the Company for appraisal of
shares of Company
Stock, and Parent shall have the right to direct all
negotiations and
proceedings with respect to such demands. Except with the prior
written consent
of Parent, the Company shall not make any payment with respect
to, or offer to
settle or settle, any such demands.
Section 2.05. Stock Options; Restricted Stock. (a) At or
immediately prior
to the Effective Time, each option to purchase shares of Company
Stock
outstanding under any employee stock option or compensation plan
or arrangement
of the Company (a "COMPANY STOCK OPTION"), whether or not vested
or exercisable,
shall be canceled, and the Company shall pay each holder of
10
<PAGE>
any such option at or promptly after the Effective Time for each
such option,
subject to applicable withholding requirements, an amount in
cash determined by
multiplying (i) the excess, if any, of the Merger Consideration
in cash per
share over the applicable exercise price of such option by (ii)
the number of
shares of Company Stock such holder could have purchased
(assuming full vesting
of all options) had such holder exercised such option in full
immediately prior
to the Effective Time.
(b) Prior to the Effective Time, the Company shall take such
actions
as may be necessary to give effect to the transactions
contemplated by this
Section 2.05.
(c) Immediately prior to the Effective Time, each share of
restricted
Company Stock that is outstanding shall become fully vested and
not subject to
any rights of repurchase or forfeiture provisions, and the
holders of such
outstanding restricted stock awards shall be treated as Persons
holding shares
of the Common Stock of the Company under this Agreement.
Section 2.06. Adjustments. If, during the period between the
date of this
Agreement and the Effective Time, there is any
reclassification,
recapitalization, stock split or combination, exchange or
readjustment of
shares, or any stock dividend thereon with a record date during
such period
relating to the Company Stock, but excluding any change that
results from any
exercise of options to purchase shares of Company Stock granted
under the
Company's stock option or compensation plans or arrangements,
the Merger
Consideration and any other amounts payable pursuant to this
Agreement shall be
appropriately adjusted.
Section 2.07. Withholding Rights. Each of the Surviving
Corporation, Parent
and any other Person required to withhold with respect to any
payment made under
this Agreement shall be entitled to deduct and withhold from the
consideration
otherwise payable to any Person pursuant to this Article 2 such
amounts as it is
required to deduct and withhold with respect to the making of
such payment under
any provision of federal, state, local or foreign tax law. If
the Surviving
Corporation or Parent, as the case may be, so withholds amounts
that it is
required to withhold and properly remit such amounts to the
appropriate Tax
Authority, such amounts shall be treated for all purposes of
this Agreement as
having been paid to the holder of the shares of Company Stock in
respect of
which the Surviving Corporation or Parent, as the case may be,
made such
deduction and withholding.
Section 2.08. Lost Certificates. If any Certificate shall have
been lost,
stolen, defaced or destroyed, upon the making of an affidavit of
that fact by
the Person claiming such Certificate to be lost, stolen, defaced
or destroyed
and the posting by such Person of a bond in such amount as the
Surviving
Corporation may direct as indemnity against any claim that may
be made against
it with respect to such Certificate, the Exchange Agent will
pay, in exchange
for such lost, stolen or destroyed Certificate, the Merger
Consideration to be
paid in respect of the shares of Company Stock represented by
such Certificate,
as contemplated by this Article 2.
ARTICLE 3
THE SURVIVING CORPORATION
Section 3.01. Certificate of Incorporation. The certificate
of
incorporation of the Surviving Corporation shall be as set forth
on Exhibit B
hereto until amended in accordance with Applicable Law.
11
<PAGE>
Section 3.02. Bylaws. The bylaws of Merger Subsidiary in effect
at the
Effective Time shall be the bylaws of the Surviving Corporation
until amended in
accordance with Applicable Law.
Section 3.03. Directors and Officers. From and after the
Effective Time,
until successors are duly elected or appointed and qualified in
accordance with
Applicable Law, (i) the directors of Merger Subsidiary at the
Effective Time
shall be the directors of the Surviving Corporation, and (ii)
the officers of
Merger Subsidiary at the Effective Time shall be the officers of
the Surviving
Corporation.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Subject to such exceptions disclosed in the Company Disclosure
Schedule (it
being expressly understood and agreed that the disclosure of any
fact or item in
any Section of the Company Disclosure Schedule shall only be
deemed to be an
exception to (or, as applicable, a disclosure for purposes of)
(i) the
representations and warranties of the Company that are contained
in the
corresponding Section of this Agreement and (ii) any other
representations and
warranties of such Company that is contained in this Agreement,
but only if the
relevance of that reference as an exception to (or a disclosure
for purposes of)
such representations and warranties is readily apparent to a
reasonable person
who has read that reference and such representations and
warranties, without any
independent knowledge on the part of the reader regarding the
matter(s) so
disclosed, the Company represents and warrants to Parent
that:
Section 4.01. Corporate Existence and Power. The Company is a
corporation
duly incorporated, validly existing and in good standing under
the laws of the
State of Delaware and has all corporate powers and all material
Permits required
to carry on its business as now conducted. The Company is duly
qualified to do
business as a foreign corporation and is in good standing in
each jurisdiction
where such qualification is necessary, except for those
jurisdictions where
failure to be so qualified would not have, individually or in
the aggregate, a
Material Adverse Effect on the Company. The Company has
heretofore delivered to
Parent true and complete copies of the certificate of
incorporation and bylaws
of the Company and each of its Subsidiaries as currently in
effect. The Company
has heretofore delivered to Parent true and complete copies of
the minutes (or,
in the case of draft minutes, the most recent versions thereof)
of the meetings
of the stockholders, the Board of Directors and any committees
of the Board of
Directors of the Company and each of its Subsidiaries since
January 1, 2005.
Section 4.02. Corporate Authorization. (a) The execution,
delivery and
performance by the Company of this Agreement and the
consummation by the Company
of the transactions contemplated hereby are within the Company's
corporate
powers and, except for the required approval of the Company's
stockholders in
connection with the consummation of the Merger, have been duly
authorized by all
necessary corporate action on the part of the Company. The
affirmative vote of
the holders of a majority of the outstanding shares of Company
Stock is the only
vote of the holders of any of the Company's capital stock
necessary in
connection with the consummation of the Merger (the "COMPANY
STOCKHOLDER
APPROVAL"). This Agreement constitutes a valid and binding
agreement of the
Company enforceable against the Company in accordance with its
terms, except to
the extent that enforceability may be limited by applicable
bankruptcy,
insolvency, fraudulent conveyance or similar laws or by general
principles of
equity.
12
<PAGE>
(b) At a meeting duly called and held, the Company's Board
of
Directors, acting upon the favorable recommendation of a special
committee of
the Board of Directors, which is comprised entirely of
disinterested,
independent directors (the "SPECIAL COMMITTEE"), has unanimously
(i) determined
that this Agreement and the transactions contemplated hereby are
fair to and in
the best interests of the Company's stockholders (other than the
Continuing
Stockholders and their Affiliates), (ii) declared this Agreement
and the
transactions contemplated hereby advisable, (iii) approved and
adopted this
Agreement and the transactions contemplated hereby, (iv)
resolved (subject to
Section 6.03) to recommend adoption of this Agreement by its
stockholders (such
recommendation, the "COMPANY BOARD RECOMMENDATION"), and (v)
taken all action
necessary to render inapplicable to this Agreement, the Merger,
the Voting
Agreements and the other transactions contemplated hereby and
thereby the
restrictions on "business combinations" (as defined in Section
203 of Delaware
Law) set forth in Section 203 of Delaware Law.
Section 4.03. Governmental Authorization. The execution,
delivery and
performance by the Company of this Agreement and the
consummation by the Company
of the transactions contemplated hereby require no action by or
in respect of,
or filing with, any Governmental Authority other than (i) the
filing of a
certificate of merger with respect to the Merger with the
Delaware Secretary of
State and appropriate documents with the relevant authorities of
other states in
which the Company is qualified to do business, (ii) compliance
with any
applicable requirements of the HSR Act and of laws analogous to
the HSR Act
existing in foreign jurisdictions, (iii) compliance with any
applicable
requirements of the 1934 Act, and any other applicable U.S.
state or federal
securities laws, and (iv) any actions or filings the absence of
which would not
be reasonably expected to have, individually or in the
aggregate, a Material
Adverse Effect on the Company.
Section 4.04. Non-contravention. Except as set forth in Section
4.04 of the
Company Disclosure Schedule, the execution, delivery and
performance by the
Company of this Agreement and the consummation of the
transactions contemplated
hereby do not and will not (i) require any consent or other
action by any Person
under, contravene, conflict with, violate, breach or constitute
a default under,
or an event that, with or without notice or lapse of time or
both, would
constitute a violation, breach or default under, or cause or
permit the
termination, cancellation, acceleration or other change of any
right or
obligation or the loss of any benefit to which the Company or
any of its
Subsidiaries is entitled under (A) any provision of the
certificate of
incorporation or bylaws of the Company or similar organizational
documents of
any of its Subsidiaries, (B) assuming compliance with the
matters referred to in
Section 4.03, any provision of any Applicable Law, (C) any
provision of any
agreement or other instrument binding upon the Company or any of
its
Subsidiaries or any Permit affecting, or relating in any way to,
the assets or
business of the Company and its Subsidiaries or (ii) result in
the creation or
imposition of any Lien on any asset of the Company or any of its
Subsidiaries,
with such exceptions, in the case of each of clauses (i)(B),
(i)(C) and (ii), as
would not be reasonably expected to have, individually or in the
aggregate, a
Material Adverse Effect on the Company.
Section 4.05. Capitalization. (a) The authorized capital stock
of the
Company consists of 30,000,000 shares of Company Stock. As of
the date of this
Agreement, there were outstanding 6,675,457 shares of Company
Stock (of which
284,400 are shares of Restricted Stock), Company Stock Options
to purchase an
aggregate of 314,975 shares of Company Stock under the Company's
1994 Stock
Incentive Plan (the "1994 PLAN") (of which options to purchase
an aggregate of
all such shares of Company Stock were exercisable), Company
Stock Options to
purchase an aggregate of 7,500 shares of Company Stock under the
Company's 2005
Stock Option Plan (the "2005 PLAN" and, together with the 1994
Plan, the
"COMPANY STOCK PLANS") (of which options to purchase an
13
<PAGE>
aggregate of all such shares of Company Stock were exercisable)
and no options
to purchase Company Stock granted outside the Company Stock
Plans. The Company
has no shares of Company Stock reserved for future issuance
under the 1994 Plan
and 591,500 shares of Company Stock reserved for future issuance
under the 2005
Plan. All outstanding shares of capital stock of the Company
have been, and all
shares that may be issued pursuant to the Company Stock Plans
will be, when
issued in accordance with the respective terms thereof, duly
authorized and
validly issued and are fully paid and nonassessable and free of
preemptive
rights. Except as set forth on Section 4.05(a)(i) of the Company
Disclosure
Schedule, no Company Subsidiary or Affiliate owns any shares of
capital stock of
the Company. Section 4.05(a)(ii) of the Company Disclosure
Schedule contains a
complete and correct list of each outstanding Company Stock
Option, including
the holder, date of grant, exercise price, expiration date,
number of shares of
Company Stock subject thereto and an indication of whether the
holder is an
employee of the Company. The Company has provided to Parent
copies of the forms
of all grant agreements pursuant to which any Company Stock
Option was granted.
Section 4.05(a)(iii) of the Company Disclosure Schedule contains
a complete and
correct list of each outstanding share of Restricted Stock,
including the
holder, date of grant, vesting schedule and number of shares of
Restricted
Stock. The Company has provided to Parent copies of the forms of
all grant
agreements pursuant to which any Restricted Stock was issued.
All Company Stock
Options and shares of Restricted Stock may, by their terms, be
treated in
accordance with 2.05. All Company Stock Options and any other
Company
Securities, in each case whether currently outstanding or
previously issued
under the Company Stock Plans or any similar equity plan
previously in
existence, were granted with an exercise price or strike price
not less than the
fair market value of the Company Stock on the grant date and
were granted in
material compliance with the applicable equity plan and the rule
of the Nasdaq
Global Market or other securities exchange on the Company Common
Stock was
traded on the grant date.
(b) Except as set forth in this Section 4.05, there are no
outstanding
(i) shares of capital stock or voting securities of the Company,
(ii) securities
of the Company convertible into or exchangeable or exercisable
for shares of
capital stock or voting securities of the Company, (iii) options
or other rights
to acquire from the Company, or other obligation of the Company
to issue, any
capital stock, voting securities or securities convertible into
or exchangeable
for capital stock or voting securities of the Company or (iv)
restricted shares,
restricted share units, stock appreciation rights, performance
shares,
contingent value rights, "phantom" stock or similar securities
or rights that
are derivative of, or provide economic benefits based, directly
or indirectly,
on the value or price of, any capital stock of, or other voting
securities or
ownership interests in, the Company (the items in clauses
(i)-(iv) being
referred to collectively as the "Company Securities"). There are
no outstanding
obligations of the Company or any of its Subsidiaries to issue,
deliver, sell,
repurchase, redeem or otherwise acquire any of the Company
Securities. Neither
the Company nor any of its Subsidiaries is a party to any voting
agreements with
respect to any Company Securities and, to the knowledge of the
Company, as of
the date of this Agreement (other than pursuant to the Voting
Agreements) there
are no irrevocable proxies and no voting agreements with respect
to any Company
Securities.
(c) Except as set forth in Section 4.05(c) of the Company
Disclosure
Schedule, no Company Securities are owned by any Subsidiary of
the Company.
(d) Except as set forth in Section 4.05(d) of the Company
Disclosure
Schedule, neither the Company nor any of its Subsidiaries has
any (A)
indebtedness for borrowed money, (B) indebtedness evidenced by
any bond,
debenture, note, mortgage, indenture or other debt instrument or
debt security,
(C) accounts payable to trade creditors and accrued expenses not
arising
14
<PAGE>
in the ordinary course of business, (D) amounts owing as
deferred purchase price
for the purchase of any property, (E) capital leases or (F)
guarantees with
respect to any indebtedness or obligation of a type described in
clauses (A)
through (E) above of any other person (collectively,
"INDEBTEDNESS"). There are
no bonds, debentures, notes or other Indebtedness of the Company
or any of its
Subsidiaries or any other securities (other than shares of
Company Stock),
instruments or obligations of the Company or any of its
Subsidiaries, in each
case, which has or which by its terms may have at any time
(whether actual or
contingent) the right to vote (or which is convertible into, or
exchangeable
for, securities having the right to vote) on any matters on
which stockholders
of the Company or any of its Subsidiaries may vote.
Section 4.06. Subsidiaries. (a) Each Subsidiary of the Company
is a
corporation duly incorporated, validly existing and in good
standing under the
laws of its jurisdiction of incorporation, has all corporate
powers and all
material Permits required to carry on its business as now
conducted. Each such
Subsidiary is duly qualified to do business as a foreign
corporation and is in
good standing in each jurisdiction where such qualification is
necessary, except
for those jurisdictions where failure to be so qualified would
not have,
individually or in the aggregate, a Material Adverse Effect on
the Company. All
material Subsidiaries of the Company and their respective
jurisdictions of
incorporation are identified in Section 4.06(a) of the Company
Disclosure
Schedule.
(b) Except as set forth in Section 4.06(b) of the Company
Disclosure
Schedule, all of the outstanding capital stock of, or other
voting securities or
ownership interests in, each Subsidiary of the Company, is owned
by the Company,
directly or indirectly, free and clear of any Lien and free of
any other
limitation or restriction (including any restriction on the
right to vote, sell
or otherwise dispose of such capital stock or other voting
securities or
ownership interests). There are no outstanding (i) securities of
the Company or
any of its Subsidiaries convertible into or exchangeable or
exercisable for
shares of capital stock or other voting securities or ownership
interests in any
Subsidiary of the Company, (ii) options or other rights to
acquire from the
Company or any of its Subsidiaries, or other obligation of the
Company or any of
its Subsidiaries to issue, any capital stock or other voting
securities or
ownership interests in, or any securities convertible into or
exchangeable for
any capital stock or other voting securities or ownership
interests in, any
Subsidiary of the Company or (iii) restricted shares, restricted
share units,
stock appreciation rights, performance shares, contingent value
rights,
"phantom" stock or similar securities or rights that are
derivative of, or
provide economic benefits based, directly or indirectly, on the
value or price
of, any capital stock of, or other voting securities or
ownership interests in,
any Subsidiary of the Company (the items in clauses (i)-(iii)
being referred to
collectively as the "COMPANY SUBSIDIARY Securities"). There are
no outstanding
obligations of the Company or any of its Subsidiaries to issue,
deliver, sell,
repurchase, redeem or otherwise acquire any of the Company
Subsidiary
Securities. Neither the Company nor any of its Subsidiaries is a
party to any
voting agreements with respect to any Company Subsidiary
Securities and, as of
the date of this Agreement there are no irrevocable proxies and
no voting
agreements with respect to any Company Subsidiary
Securities.
(c) Except as set forth in Section 4.06(c) of the Company
Disclosure
Schedule, except for the Company Subsidiary Securities, the
Company does not
own, directly or indirectly, any capital stock of, or other
equity, ownership,
profit, voting or other interests in, or any interest
convertible, exchangeable
or exercisable for, any equity, profit, voting or similar
interest in, any
Person.
Section 4.07. SEC Filings and the Sarbanes-Oxley Act. (a) The
Company has
delivered or made available to Parent, or the Electronic Data
Gathering,
Analysis and Retrieval (EDGAR)
15
<PAGE>
database of the SEC contains in a publicly available format,
complete and
correct copies of all reports, schedules, forms, statements and
other documents
filed by the Company with or furnished by the Company to the SEC
since January
1, 2004 (collectively, the "COMPANY SEC DOCUMENTS"). Since
January 1, 2004, the
Company has filed with or furnished to the SEC each report,
schedule, form,
statement or other document or filing required by Law to be
filed or furnished
at or prior to the time so required. No Subsidiary of the
Company is required to
file or furnish any report, schedule, form, statement or other
document or
filing with the SEC.
(b) As of their respective dates, each of the Company SEC
Documents
complied, and each such Company SEC Document filed subsequent to
the date hereof
will comply, as to form in all material respects with the
applicable
requirements of the 1933 Act and the 1934 Act, as the case may
be.
(c) As of its filing date (or, if amended or superseded by a
filing
prior to the date hereof, on the date of such filing), each
Company SEC Document
filed pursuant to the 1934 Act did not, and each such Company
SEC Document filed
subsequent to the date hereof will not, contain any untrue
statement of a
material fact or omit to state any material fact necessary in
order to make the
statements made therein, in the light of the circumstances under
which they were
made, not misleading. The Company has provided to Parent copies
of all comment
letters received from the SEC since January 1, 2004 relating to
the Company SEC
Documents, and any written responses of the Company thereto.
There are no
outstanding or unresolved comments in any comment letters
received by the
Company from the SEC. As of the date of this Agreement, to the
Knowledge of the
Company, none of the Company SEC Documents is the subject of any
ongoing review
by the SEC.
(d) Each Company SEC Document that is a registration statement,
as
amended or supplemented, if applicable, filed pursuant to the
1933 Act, as of
the date such registration statement or amendment became
effective, did not, and
each such Company SEC Document that becomes effective subsequent
to the date
hereof will not, as of such date, contain any untrue statement
of a material
fact or omit to state any material fact required to be stated
therein or
necessary to make the statements therein not misleading.
(e) The Company is in compliance in all material respects with
the
provisions of the Sarbanes-Oxley Act and the rules and
regulations promulgated
thereunder applicable to it. The Company has promptly disclosed,
by filing a
Form 8-K, any change in or waiver of the Company's code of
ethics, as required
by Section 406(b) of the Sarbanes-Oxley Act. To the Knowledge of
the Company,
there have been no violations of provisions of the Company's
code of ethics.
(f) The Company has established and maintains disclosure
controls and
procedures (as defined in Rule 13a-15 under the 1934 Act). Such
disclosure
controls and procedures are designed to ensure that material
information
relating to the Company, including its consolidated
Subsidiaries, is made known
to the Company's principal executive officer and its principal
financial officer
by others within those entities, particularly during the periods
in which the
periodic reports required under the 1934 Act are being prepared.
Such disclosure
controls and procedures are effective in timely alerting the
Company's principal
executive officer and principal financial officer to material
information
required to be included in the Company's periodic reports
required under the
1934 Act.
(g) The Company and its Subsidiaries have established and
maintain a
system of internal control over financial reporting (as defined
in Rule 13a-15
under the 1934 Act) ("INTERNAL
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CONTROLS"). Such internal controls are sufficient to provide
reasonable
assurance regarding the reliability of the Company's financial
reporting and the
preparation of Company financial statements for external
purposes in accordance
with GAAP. The Company has disclosed, based on its most recent
evaluation of
internal controls prior to the date hereof, to the Company's
auditors and audit
committee (x) any significant deficiencies and material
weaknesses in the design
or operation of internal controls which are reasonably likely to
adversely
affect the Company's ability to record, process, summarize and
report financial
information and (y) any fraud, whether or not material, that
involves management
or other employees who have a significant role in internal
controls. The Company
has made available to Parent a summary of any such disclosure
made by management
to the Company's auditors and audit committee since April 1,
2006.
(h) There are no outstanding loans or other extensions of credit
made
by the Company or any of its Subsidiaries to any executive
officer (as defined
in Rule 3b-7 under the 1934 Act) or director of the Company. The
Company has
not, since the enactment of the Sarbanes-Oxley Act, taken any
action prohibited
by Section 402 of the Sarbanes-Oxley Act.
Section 4.08. Financial Statements. The financial statements
(including the
notes) of the Company included in the Company SEC Documents
complied, at the
time the respective statements were filed, or with respect to
Company SEC
Document filed subsequent to the date hereof will comply, at the
time the
respective statements are filed, as to form in all material
respects with the
applicable accounting requirements and the published rules and
regulations of
the SEC with respect thereto, have been or will be prepared in
accordance with
GAAP applied on a consistent basis (except as may be indicated
in the notes
thereto) and fairly present the consolidated financial position
of the Company
and its consolidated Subsidiaries as of the dates thereof and
their consolidated
results of operations and cash flows for the periods then
ended.
Section 4.09. Disclosure Documents. The proxy or information
statement of
the Company to be filed with the SEC in connection with the
Merger (the "COMPANY
PROXY STATEMENT") and any amendments or supplements thereto
will, when filed,
comply as to form in all material respects with the applicable
requirements of
the 1934 Act. At the time the Company Proxy Statement or any
amendment or
supplement thereto is first mailed to stockholders of the
Company and at the
time such stockholders vote on adoption of this Agreement, the
Company Proxy
Statement, as supplemented or amended, if applicable, will not
contain any
untrue statement of a material fact or omit to state any
material fact necessary
in order to make the statements made therein, in the light of
the circumstances
under which they were made, not misleading. Any other documents
filed by the
Company with the SEC pursuant to Regulation 14A under the 1934
Act (the "COMPANY
PROXY MATERIALS") will not, at the time they are filed with the
SEC or otherwise
disseminated to the stockholders of the Company or the public,
contain any
untrue statement of a material fact or omit to state any
material fact necessary
in order to make the statements made therein, in the light of
the circumstances
under which they were made, not misleading. The representations
and warranties
contained in this Section 4.09 will not apply to statements or
omissions
included in the Company Proxy Statement or Company Proxy
Materials based upon
information furnished to the Company in writing by Parent
specifically for use
therein.
Section 4.10. Absence of Certain Changes. Except as disclosed in
Section
4.10 of the Company Disclosure Schedule, since the Company
Balance Sheet Date,
the Company and its Subsidiaries have conducted their businesses
in the ordinary
course of business and in a manner consistent with past
practices, and there has
not been:
17
<PAGE>
(a) any event, occurrence, development or state of circumstances
or
facts that has had or could have, individually or in the
aggregate, a Material
Adverse Effect on the Company;
(b) any amendment of the articles of incorporation, bylaws or
other
similar organizational documents (whether by merger,
consolidation or otherwise)
of the Company or its Subsidiaries;
(c) any splitting, combination or reclassification of any shares
of
capital stock of the Company or any of its Subsidiaries or
declaration, setting
aside or payment of any dividend or other distribution (whether
in cash, stock
or property or any combination thereof) in respect of its
capital stock, or
redemption, repurchase or other acquisition or offer to redeem,
repurchase, or
otherwise acquire any Company Securities or any Company
Subsidiary Securities,
except for regular quarterly cash dividends with customary
record and payment
dates on the shares of Company Stock not in excess of $0.10 per
share per
quarter;
(d) (i) any issuance, delivery or sale, or authorization of
the
issuance, delivery or sale of, any shares of any Company
Securities or Company
Subsidiary Securities, other than the issuance of (A) any shares
of the Company
Stock upon the exercise of Company Stock Options that were
outstanding on the
Company Balance Sheet Date in accordance with the terms of those
options on the
Company Balance Sheet Date and (B) any Company Subsidiary
Securities to the
Company or any other Subsidiary or (ii) amendment of any term of
any Company
Security or any Company Subsidiary Security (in each case,
whether by merger,
consolidation or otherwise);
(e) authorization of, or commitment to make, capital
expenditures in
excess of $500,000 in the aggregate;
(f) any acquisition (by merger, consolidation, acquisition of
stock or
assets or otherwise), directly or indirectly, by the Company or
any of its
Subsidiaries of any Person or any division of any Person or any
material amount
of assets of in any Person;
(g) any sale, lease or other transfer, or creation or incurrence
of
any Lien on, any assets, securities, properties, interests or
businesses of the
Company or any of its Subsidiaries, other than sales of
inventory in the
ordinary course of business consistent with past practice;
(h) other than in connection with actions permitted by Section
4.10(d)
or Section 4.10(e), the making by the Company or any of its
Subsidiaries of any
loans, advances or capital contributions to, or investments in,
any other
Person, other than in the ordinary course of business consistent
with past
practice;
(i) the creation, incurrence, assumption or sufferance to exist
by the
Company or any of its Subsidiaries of any indebtedness for
borrowed money or
guarantees thereof;
(j) the entering into of any agreement or arrangement that
limits or
otherwise restricts in any material respect the Company, any of
its Subsidiaries
or any of their respective Affiliates or any successor thereto
or that could,
after the Effective Time, limit or restrict in any material
respect the Company,
any of its Subsidiaries, the Surviving Corporation, Parent or
any of their
respective Affiliates, from engaging or competing in any line of
business, in
any location or with any Person;
18
<PAGE>
(k) the entering into, amendment or modification in any
material
respect or termination of any Material Contract or waiver,
release or assignment
of any material rights, claims or benefits of the Company or any
of its
Subsidiaries;
(l) (i) any grant or increase of any severance or termination
pay to
(or amendment of any existing arrangement with) any director,
officer or
employee of the Company or any of its Subsidiaries, (ii) any
increase in
benefits payable under any existing severance or termination pay
policies or
employment agreements, (iii) the entry into any employment,
deferred
compensation or other similar agreement (or amendment of any
such existing
agreement) with any director, officer or employee of the Company
or any of its
Subsidiaries, (iv) any establishment, adoption or amendment
(except as required
by Applicable Law) of any collective bargaining, bonus,
profit-sharing, thrift,
pension, retirement, deferred compensation, compensation, stock
option,
restricted stock or other benefit plan or arrangement covering
any director,
officer or employee of the Company or any of its Subsidiaries or
(v) any
material increase in compensation, bonus or other benefits
payable to any
director, officer or employee of the Company or any of its
Subsidiaries;
(m) any material labor dispute, other than routine
individual
grievances, or any activity or proceeding by a labor union or
representative
thereof to organize any employees of the Company or any of its
Subsidiaries,
which employees were not subject to a collective bargaining
agreement at the
Company Balance Sheet Date, or any lockouts, strikes, slowdowns,
work stoppages
or threats thereof by or with respect to such employees;
(n) any change in the Company's methods of accounting, except
as
required by Applicable Law or GAAP;
(o) any settlement of, or offer or proposal to settle, (i)
any
material litigation, investigation, arbitration, proceeding or
other claim
involving or against the Company or any of its Subsidiaries,
(ii) any
stockholder litigation or dispute against the Company or any of
its officers or
directors or (iii) any litigation, arbitration, proceeding or
dispute that
relates to the transactions contemplated hereby;
(p) any write-down by the Company or any of its Subsidiaries of
any of
the material assets of the Company or its Subsidiaries not in
the usual course
of business; or
(q) any Tax election made or changed other than in the ordinary
course
of business, any annual tax accounting period made or changed,
any method of tax
accounting adopted or changed, any Tax Returns amended
materially or claims for
material Tax refunds filed, any material closing agreement
entered into, any
material Tax claim, audit or assessment settled, or any right to
claim a
material Tax refund, offset or other reduction in Tax liability
surrendered.
Section 4.11. No Undisclosed Material Liabilities. There are no
liabilities
or obligations of the Company or any of its Subsidiaries of any
kind whatsoever,
whether accrued, contingent, absolute, determined, determinable
or otherwise,
and there is no existing condition, situation or set of
circumstances that could
reasonably be expected to result in such a liability or
obligation, other than:
(a) liabilities or obligations disclosed and provided for in
the
Company Balance Sheet or in the notes thereto,
19
<PAGE>
(b) liabilities or obligations incurred in the ordinary course
of
business consistent with past practices since the Company
Balance Sheet Date
which are not material in amount to the Company and its
Subsidiaries taken as a
whole;
(c) liabilities and obligations under this Agreement; and
(d) other liabilities or obligations which are not material in
amount
to the Company and its Subsidiaries taken as a whole.
Section 4.12. Compliance with Laws; Permits. Except as listed in
Section
4.18 of the Company Disclosure Schedule, the Company and each of
its
Subsidiaries is, and since January 1, 2004, has been in
compliance in all
material respects with Applicable Law, and has not received
notice of any
investigation with respect to or been threatened to be charged
with or given
notice of any violation of any Applicable Law. The Company and
each of its
Subsidiaries is and, since January 1, 2004 has been in
compliance in all
material respects with their respective material Permits, and
has not received
notice of any violation related to any such Permit or any
revocation or
threatened revocation of any such Permit.
Section 4.13. Litigation. Except as listed in Section 4.13 of
the Company
Disclosure Schedule, there is no claim, action, suit,
investigation or
proceeding ("PROCEEDINGS") pending against, or, to the Knowledge
of the Company,
threatened against or affecting, the Company, any of its
Subsidiaries, any
present or former officer, director or employee of the Company
or any of its
Subsidiaries or any Person for whom the Company or any
Subsidiary may be liable
or any of their respective properties before any court or
arbitrator or before
or by any Governmental Authority. Neither the Company nor any of
its
Subsidiaries is subject to any order, writ, judgment,
injunction, decree,
determination or award of any Governmental Authority (each, an
"ORDER") against
the Company or any of its Subsidiaries or naming the Company or
any of its
Subsidiaries as a party or by which any of the employees or
representatives of
the Company or any of its Subsidiaries is prohibited or
restricted from engaging
in or otherwise conducting the business of the Company or any of
its
Subsidiaries as presently conducted.
Section 4.14. Finders' Fees; Expenses. Except for Houlihan Lokey
Howard &
Zukin Capital, Inc. and Houlihan Lokey Howard & Zukin
Financial Advisors, Inc.,
there is no investment banker, broker, finder or other
intermediary that has
been retained by or is authorized to act on behalf of the
Company or any of its
Subsidiaries who might be entitled to any fee or commission from
the Company or
any of its Affiliates in connection with the transactions
contemplated by this
Agreement. The Company has delivered to Parent a copy of any
agreement pursuant
to which any such fee or commission may be payable and any
indemnification and
other agreements related to the engagement of the persons to
whom such fees are
payable. Section 4.14 of the Company Disclosure Schedule sets
forth the
Company's good faith estimate of the aggregate fees and expenses
of any
accountants, brokers, financial advisors, consultants, legal
counsel or other
persons retained by the Company incurred or to be incurred by
the Company and
its Subsidiaries in connection with this Agreement or the
transactions
contemplated hereby.
Section 4.15. Opinion of Financial Advisor. The Company has
received the
opinion of Houlihan Lokey Howard & Zukin Financial Advisors,
Inc., dated October
1, 2007, to the effect that, as of that date, the consideration
to be received
in the Merger by the holders of the Company Common Stock (other
than the
Continuing Stockholders and their Affiliates) is fair from a
financial point of
view to such holders.
20
<PAGE>
Section 4.16. Taxes. (a) All Tax Returns required by Applicable
Law to be
filed with any Taxing Authority by, or on behalf of, the Company
or any of its
Subsidiaries have been filed when due (including extensions) in
accordance with
all Applicable Laws, and all such Tax Returns are true and
complete in all
material respects.
(b) The Company and each of its Subsidiaries has paid (or has
had paid
on its behalf) or has withheld and remitted to the appropriate
Taxing Authority
all material Taxes shown as due and payable on the Tax Returns
that have been
filed and any other material Taxes that are due and payable, or,
where payment
is not yet due (or with respect to Taxes which are being
contested in good
faith), has established (or has had established on its behalf
and for its sole
benefit and recourse) in accordance with GAAP an adequate
accrual for all
material Taxes through the end of the last period for which the
Company and its
Subsidiaries ordinarily record items on their respective
books.
(c) There is no claim, audit, action, suit, proceeding or
investigation now pending or, to the Company's Knowledge,
threatened against or
with respect to the Company or its Subsidiaries in respect of
any Tax or Tax
asset.
(d) During the five-year period ending on the date hereof,
neither the
Company nor any of its Subsidiaries was a distributing
corporation or a
controlled corporation in a transaction intended to be governed
by Section 355
of the Code.
(e) The Company has provided or made available to Parent true
and
complete copies of all United States and California State Tax
Returns filed with
respect to it or its Subsidiaries, as the case may be, for
taxable periods
ending after December 31, 2004. The Company has provided a FIN48
summary of all
of its Tax Returns for its Subsidiaries since December 31,
2004.
(f) Neither the Company nor any of its Subsidiaries or any
predecessor
has waived any statute of limitations with respect to Taxes or
agreed to any
extension of time with respect to a Tax assessment or
deficiency, or has made
any request in writing for any such extension or waiver.
(g) Neither the Company nor any of its Subsidiaries has entered
into
any "reportable transaction" as such term is defined in Treasury
Regulation
Section 1.6011-4(b)(1) or any "listed transaction" within the
meaning of
Treasury Regulation Section 1.6011-4(b)(2), or any other
transaction requiring
disclosure under analogous provisions of state, local or foreign
Tax legal
requirement.
(h) The Company and each of the Subsidiaries have withheld and
paid
all Taxes required to be withheld and paid in connection with
amounts paid and
owing to any employee, independent contractor, creditor,
stockholder or other
third party (whether domestic or foreign).
(i) Neither the Company nor any of its Subsidiaries has
liability for
the Taxes of any Person other than the Company and its
Subsidiaries (i) under
Treasury Regulations Section 1.1502-6 (or any similar provision
of state, local
or foreign legal requirement), (ii) as a transferee or
successor, (iii) by
contract, or (iv) otherwise.
(j) There are no adjustments under Section 481 of the Code (or
any
similar adjustments under any provision of the Code or the
corresponding
foreign, state or local Tax laws) that are required to be taken
into account by
the Company or any of its Subsidiaries in any period
21
<PAGE>
ending after the Closing Date by reason of a change in method of
accounting in
any taxable period ending on or before the Closing Date.
(k) None of the Company or any Subsidiary has been informed by
any
jurisdiction that the jurisdiction believes that the Company or
any Subsidiary
was required to file any Tax Return or pay any tax that was not
filed or was not
paid.
(l) "TAX" means (i) any tax, governmental fee or other like
assessment
or charge (including withholding on amounts paid to or by any
Person), together
with any interest, penalty, addition to tax or additional amount
imposed by any
Governmental Authority (a "TAXING AUTHORITY") responsible for
the imposition of
any such tax (domestic or foreign), and any liability for any of
the foregoing
as transferee, (ii) in the case of the Company or any of its
Subsidiaries,
liability for the payment of any amount of the type described in
clause (i) as a
result of being or having been before the Effective Time a
member of an
affiliated, consolidated, combined or unitary group, or a party
to any agreement
or arrangement, as a result of which liability of the Company or
any of its
Subsidiaries to a Taxing Authority is determined or taken into
account with
reference to the activities of any other Person, and (iii)
liability of the
Company or any of its Subsidiaries for the payment of any amount
as a result of
being party to any Tax Sharing Agreement or with respect to the
payment of any
amount imposed on any person of the type described in (i) or
(ii) as a result of
any existing express or implied agreement or arrangement
(including an
indemnification agreement or arrangement). "TAX RETURN" means
any report,
return, document, declaration or other information or filing
required to be
supplied to any Taxing Authority with respect to Taxes,
including information
returns, any documents with respect to or accompanying payments
of estimated
Taxes, or with respect to or accompanying requests for the
extension of time in
which to file any such report, return, document, declaration or
other
information. "TAX SHARING AGREEMENTS" means all existing
agreements or
arrangements (whether or not written) binding the Company or any
of its
Subsidiaries that provide for the allocation, apportionment,
sharing or
assignment of any Tax liability or benefit, or the transfer or
assignment of
income, revenues, receipts, or gains for the purpose of
determining any Person's
Tax liability excluding any indemnification agreement or
arrangement pertaining
to the sale or lease of assets or subsidiaries).
Section 4.17. Employee Benefit Plans. (a) Section 4.17 of the
Company
Disclosure Schedule contains a complete and correct list
identifying each
"employee benefit plan," as defined in Section 3(3) of ERISA
(whether or not
such plan is subject to ERISA), each employment, severance or
similar contract,
plan, arrangement or policy and each other plan or arrangement
(written or oral,
formal or informal) providing for compensation, bonuses,
profit-sharing, stock
option or other stock related rights or other forms of incentive
or deferred
compensation, vacation benefits, insurance (including any
self-insured
arrangements), health or medical benefits, employee assistance
program,
disability or sick leave benefits, workers' compensation,
supplemental
unemployment benefits, severance benefits and post-employment or
retirement
benefits (including compensation, pension, health, medical or
life insurance
benefits) which is maintained, administered or contributed to
b
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