AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

 

AGREEMENT AND PLAN OF MERGER

by and among

PLANET HOLLYWOOD INTERNATIONAL, INC.

(“Parent”)

BUCA FINANCING, LLC

(“Purchaser”)

and

BUCA, INC.

(the “Company”)

Dated as of August 5, 2008

 

TABLE OF CONTENTS

 

 

i

 

ii

 

iii

ANNEX

 

Annex I

Conditions to the Offer

 

iv

AGREEMENT AND PLAN OF MERGER

This AGREEMENT AND PLAN OF MERGER (this “ Agreement ”) is dated as of August 5, 2008, by and among Planet Hollywood International, Inc., a Delaware corporation (“ Parent ”), BUCA Financing, LLC, a Florida limited liability company and an indirect wholly owned subsidiary of Parent (“ Purchaser ”), and BUCA, Inc., a Minnesota corporation (the “ Company ”). Certain capitalized terms used in this Agreement are defined in Section 9.5; the location of the definitions for certain other defined terms is set forth in Section 9.6.

WHEREAS , each of Parent and the Board of Directors of each of Purchaser and the Company has approved, and the Board of Directors of each of Purchaser and the Company deems it advisable and in the best interests of each respective corporation and its shareholders to consummate, the acquisition of the Company by Parent on the terms and subject to the conditions set forth in this Agreement;

WHEREAS , Purchaser has agreed, on the terms and subject to the conditions set forth in this Agreement, to commence a tender offer (the “ Offer ”) to purchase all of the outstanding shares of the common stock, par value $0.01 per share, of the Company (the “ Common Stock ” and the shares of the Common Stock being referred to collectively as the “ Shares ”), at a price per Share of $0.45 (such price or any higher price per Share that may be paid pursuant to the Offer being hereinafter referred to as the “ Offer Price ”), subject to any withholding of Taxes required by applicable law, net to the seller in cash without interest;

WHEREAS , following the consummation of the Offer, on the terms and subject to the conditions set forth in this Agreement, Purchaser will be merged with and into the Company with the Company as the Surviving Corporation (the “ Merger ,” and together with the Offer and the other transactions contemplated by this Agreement, collectively, the “ Transactions ”), in accordance with the Minnesota Business Corporation Act (the “ MBCA ”), the Florida Limited Liability Company Act, and in accordance therewith each issued and outstanding Share not owned directly or indirectly by Parent, Purchaser or any Company Subsidiary and not constituting Dissenting Shares will be converted into the right to receive the Offer Price in cash without interest, subject to any withholding of Taxes required by applicable law, in accordance with the terms hereof;

WHEREAS , the Board of Directors of the Company (the “ Company Board of Directors ”), on the terms and subject to the conditions set forth in this Agreement, has (i) determined that the Transactions are advisable and in the best interests of the Company’s shareholders, (ii) approved this Agreement and the Transactions, including the Offer and the Merger, and (iii) determined to recommend that the Company’s shareholders accept the Offer and tender their Shares to Purchaser pursuant to the Offer and, to the extent applicable, approve and adopt this Agreement;

WHEREAS , each of Parent and the Board of Directors of Purchaser has, on the terms and subject to the conditions set forth in this Agreement, approved this Agreement and the Transactions, including the Offer and the Merger, and the Board of Directors of Purchaser has determined that this Agreement and the Transactions, including the Offer and the Merger, are advisable; and

WHEREAS , Parent, Purchaser and the Company desire to (i) make certain representations and warranties in connection with the Offer and the Merger, (ii) make certain covenants and agreements in connection with the Offer and the Merger, and (iii) prescribe various conditions to the Offer and the Merger.

NOW, THEREFORE , in consideration of the mutual covenants and promises contained in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement agree as follows:

ARTICLE I

THE OFFER AND THE MERGER

Section 1.1 The Offer.

(a) Provided that this Agreement shall not have been terminated in accordance with Section 8.1 and none of the events set forth in paragraph (b) of Annex I shall exist or have occurred and be continuing, as promptly as practicable (and in any event within five business days) after the date of this Agreement, Purchaser shall (and Parent shall cause Purchaser to) commence (within the meaning of Rule 14d-2 promulgated under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”)), the Offer to purchase for cash all outstanding Shares at the Offer Price.

(b) Promptly after the latest of (i) the earliest date as of which Purchaser is permitted under applicable law to accept for payment Shares validly tendered and not withdrawn pursuant to the Offer, (ii) the earliest date as of which each of the conditions and requirements set forth in Annex I (the “ Offer Conditions ”) has been satisfied or waived by Parent or Purchaser, and (iii) the Expiration Date, Purchaser shall (and Parent shall cause Purchaser to) consummate the Offer in accordance with its terms and accept for payment and pay for all Shares (without interest) validly tendered and not withdrawn pursuant to the Offer. The obligation of Purchaser to accept for payment and pay for Shares tendered and not withdrawn pursuant to the Offer shall be subject only to the satisfaction, or waiver by Parent or Purchaser, of each of the Offer Conditions (and shall not be subject to any other conditions).

(c) The Offer shall be made by means of an offer to purchase (the “ Offer to Purchase ”) that contains, among other things, the terms set forth in this Agreement, the Minimum Condition and the other conditions and requirements set forth in Annex I . Parent and Purchaser expressly reserve the right to (x) increase the Offer Price and (y) waive any Offer Conditions and make any other changes to the terms and conditions of the Offer; provided , however , that unless otherwise provided by this Agreement, without the prior written consent of the Company, neither Parent nor Purchaser shall (i) decrease the Offer Price, (ii) change the form of consideration payable in the Offer, (iii) decrease the number of Shares sought to be purchased in the Offer, (iv) impose conditions or requirements to the Offer that are different than or in addition to the Offer Conditions, (v) change or waive the Minimum Condition, (vi) amend or modify any of the Offer Conditions in a manner that adversely affects, or reasonably could adversely affect, the holders of Shares, or (vii) extend or otherwise change the expiration date of the Offer other than as required or permitted by this Agreement.

(d) Unless extended pursuant to and in accordance with the terms of this Agreement, the Offer shall expire at midnight (New York City time) on the date that is 20 business days following the commencement (within the meaning of Rule 14d-2 promulgated under the Exchange Act) of the Offer (the “ Initial Expiration Date ”) or, in the event the Initial Expiration Date has been extended pursuant to and in accordance with the terms of this Agreement, the date to which the Offer has been so extended (the Initial Expiration Date, or such later date to which the Initial Expiration Date has been extended pursuant to and in accordance with the terms of this Agreement, is referred to as the “ Expiration Date ”).

(e) The Offer shall be extended from time to time as follows:

(i) If on or prior to any then scheduled Expiration Date all of the Offer Conditions (including the Minimum Condition) shall not have been satisfied or waived by Parent or Purchaser (if permitted hereunder), then Purchaser shall (and Parent shall cause Purchaser to) extend the Offer for one or more successive periods of not more than 10 business days each in order to permit the satisfaction of such conditions, each until the earlier of (x) the termination of this Agreement pursuant to Section 8.1 and (y) the date that is 90 days after commencement of the Offer (the “ Outside Date ”); and

 

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(ii) Purchaser shall extend the Offer for any period or periods required by any then applicable law, rule, regulation, interpretation or position of the Securities and Exchange Commission (the “ SEC ”) or its staff or NASDAQ or its staff.

(f) If necessary to obtain sufficient Shares to reach the Short-Form Threshold, Purchaser may, in its sole discretion, provide for a subsequent offering period in accordance with Rule 14d-11 promulgated under the Exchange Act. Notwithstanding the foregoing, in the event that more than 80% of the then outstanding Shares have been validly tendered and not withdrawn pursuant to the Offer following the Expiration Date, Purchaser shall (and Parent shall cause Purchaser to) provide for a subsequent offering period in accordance with Rule 14d-11 promulgated under the Exchange Act of at least 10 business days immediately following the Expiration Date; provided , that Purchaser shall not be required to make available such a subsequent offering period in the event that, prior to the commencement of such subsequent offering period, Parent, Purchaser and their respective related organizations (as defined in Section 302A.011, Subd. 25, of the MBCA), in the aggregate, own more than 90% of the outstanding Shares. Subject to the terms and conditions of this Agreement and the Offer, Purchaser shall (and Parent shall cause Purchaser to) accept for payment, and pay for, all Shares that are validly tendered and not withdrawn pursuant to the Offer during such subsequent offering period promptly after any such Shares are tendered during such subsequent offering period. The Offer Documents will provide for the possibility of a subsequent offering period in a manner consistent with the terms of this Section 1.1(f).

(g) Purchaser shall not terminate the Offer prior to any scheduled Expiration Date without the prior written consent of the Company, except in the event that this Agreement is terminated pursuant to Section 8.1. In the event that this Agreement is terminated pursuant to Section 8.1, Purchaser shall (and Parent shall cause Purchaser to) promptly (and in any event within 24 hours of such termination), irrevocably and unconditionally terminate the Offer and shall not acquire any Shares pursuant to the Offer.

(h) On the date of the commencement of the Offer (within the meaning of Rule 14d-2 promulgated under the Exchange Act), Purchaser shall (and Parent shall cause Purchaser to) file with the SEC, pursuant to Regulation M-A under the Exchange Act (“ Regulation M-A ”), a Tender Offer Statement on Schedule TO with respect to the Offer (together with all amendments, supplements and exhibits thereto, the “ Schedule TO ”). The Schedule TO shall include, as exhibits, the Offer to Purchase and a form of letter of transmittal and summary advertisement (collectively, together with any amendments and supplements thereto, the “ Offer Documents ”). Parent and Purchaser agree to take all steps necessary to cause the Offer Documents to be filed with the SEC and disseminated to holders of the Shares, in each case as and to the extent required by the Exchange Act. Each of Parent, Purchaser and the Company agrees to correct promptly any information provided by it for use in the Offer Documents if and to the extent that such information shall have become false or misleading in any material respect or as otherwise required by applicable law. Parent and Purchaser further agree to take all steps necessary to cause the Offer Documents, as so corrected (if applicable), to be filed with the SEC and disseminated to holders of the Shares, in each case as and to the extent required by the Exchange Act. The Company and its counsel shall be given a reasonable opportunity to review the Schedule TO and the Offer Documents before they are filed with the SEC, and Parent and Purchaser shall give due consideration to all reasonable additions, deletions or changes suggested thereto by the Company and its counsel. Parent and Purchaser agree to use all reasonable best efforts to respond promptly to any comments of the SEC or its staff with respect to the Offer Documents. In addition, Parent and Purchaser shall provide the Company and its counsel with copies of any written comments, and shall inform them of any oral comments, that Parent, Purchaser or their counsel may receive from time to time from the SEC or its staff with respect to the Schedule TO or the Offer Documents promptly after receipt of such comments, and any written or oral responses thereto. Parent and Purchaser shall give the Company and its counsel a reasonable opportunity to review any such written responses and shall give due consideration to all reasonable additions, deletions or changes suggested thereto by the Company and its counsel. If Purchaser terminates or withdraws the Offer, or this Agreement is terminated prior to the purchase of Shares in the Offer, Purchaser shall promptly return, and shall cause any depository acting on behalf of Purchaser to return, all tendered Shares to the registered holders thereof.

 

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(i) Purchaser shall (and Parent shall cause Purchaser to) timely file with the Commissioner of Commerce of the State of Minnesota a registration statement relating to the Offer required to be filed pursuant to Chapter 80B of the Minnesota Statutes and shall disseminate the registration statement as required by Chapter 80B of the Minnesota Statutes. The Company and Purchaser shall (and Parent shall cause Purchaser to) promptly file with the Commissioner of Commerce of the State of Minnesota all materials referred to in Section 80B.04 of the Minnesota Statutes.

(j) The Offer Price shall be adjusted appropriately to reflect the effect of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into Common Stock), cash dividend, reorganization, recapitalization, reclassification, combination or other like change with respect to Common Stock occurring on or after the date of this Agreement and prior to the Acceptance Time, if any.

Section 1.2 Company Actions.

(a) Contemporaneous with the filing of the Schedule TO, the Company shall, in a manner that complies with Rule 14d-9 promulgated under the Exchange Act, file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 with respect to the Offer (together with all amendments, supplements and exhibits thereto, the “ Schedule 14D-9 ”) that shall, subject to the provisions of Section 5.3(d) and Section 5.4(c), contain the Company Recommendation. The Company further agrees to take all steps necessary to cause the Schedule 14D-9 to be filed with the SEC and disseminated to holders of Shares, in each case as and to the extent required by the Exchange Act. Each of Parent, Purchaser and the Company agrees to correct promptly any information provided by it for use in the Schedule 14D-9 if and to the extent that such information shall have become false or misleading in any material respect or as otherwise required by applicable law. The Company further agrees to take all steps necessary to cause the Schedule 14D-9, as so corrected (if applicable), to be filed with the SEC and disseminated to holders of Shares, in each case as and to the extent required by the Exchange Act. Parent, Purchaser and their counsel shall be given a reasonable opportunity to review the Schedule 14D-9 before it is filed with the SEC, and the Company shall give due consideration to all reasonable additions, deletions or changes suggested thereto by Parent, Purchaser and their counsel. In addition, the Company shall provide Parent, Purchaser and their counsel with copies of any written comments, and shall inform them of any oral comments, that the Company or its counsel may receive from time to time from the SEC or its staff with respect to the Schedule 14D-9 promptly after the Company’s receipt of such comments, and any written or oral responses thereto. Parent, Purchaser and their counsel shall be given a reasonable opportunity to review any such written responses, and the Company shall give due consideration to all reasonable additions, deletions or changes suggested thereto by Parent, Purchaser and their counsel. The Company agrees to use all reasonable best efforts to respond promptly to any comments of the SEC or its staff with respect to the Schedule 14D-9.

(b) In connection with the Offer, the Company shall promptly furnish or cause to be furnished to Purchaser mailing labels, security position listings and any available listing or computer files containing the names and addresses of the record holders of the Shares as of the most recent practicable date, together with copies of all lists of shareholders, security position listings and computer files and all other information in the Company’s possession or control regarding the beneficial owners of the Shares, and shall promptly furnish Purchaser with such information and assistance (including lists of holders of the Shares, updated promptly from time to time upon Purchaser’s request, and their addresses, mailing labels and lists of security positions) as Purchaser or its agent reasonably may request for the purpose of communicating the Offer to the record and beneficial holders of the Shares. Except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Offer, the Merger and the other Transactions, Purchaser shall hold in confidence the information contained in any such labels, listings and files, shall use such information only in connection with the Offer, the Merger and the other Transactions, and, if this Agreement shall be terminated, shall promptly deliver to the Company the original and all copies of such information.

 

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Section 1.3 Board of Directors.

(a) Upon Purchaser accepting for payment and paying for any Shares tendered and not withdrawn pursuant to the Offer (the “ Acceptance Time ”), and at all times thereafter, subject to compliance with applicable law and the then applicable Marketplace Rules of The NASDAQ Stock Market LLC (the “ NASDAQ ”), Purchaser shall be entitled to designate such number of directors, rounded up to the next whole number, on the Company Board of Directors as is equal to the product of (i) the total number of directors on the Company Board of Directors (after giving effect to the directors appointed as a result of designations by Purchaser pursuant to this sentence) multiplied by (ii) the percentage that the aggregate number of Shares beneficially owned by Parent, Purchaser and any of their affiliates bears to the total number of Shares then outstanding (disregarding any unvested and unexercisable Company Options and all other unvested rights to acquire shares of the Common Stock). As used in this Agreement, the term “ beneficial ownership ” (and its correlative terms) shall have the meanings assigned to such terms in Rule 13d-3 under the Exchange Act. The Company shall, upon any exercise of such right by Purchaser, (A) take all such actions as are necessary or desirable to appoint to the Company Board of Directors the individuals designated by Purchaser and permitted to be so designated by the first sentence of this Section 1.3(a), including promptly filling vacancies or newly created directorships on the Company Board of Directors, promptly increasing the size of the Company Board of Directors (including by action of the Company Board of Directors and by the amendment of the Company Bylaws, if necessary, so as to increase the size of the Company Board of Directors) and/or promptly seeking the resignations of such number of its incumbent directors as are necessary or desirable to enable Purchaser’s designees to be so appointed to the Company Board of Directors, and (B) use its reasonable best efforts to cause Purchaser’s designees to be so elected at such time. The Company shall, upon Purchaser’s request following the Acceptance Time, also cause Persons designated by Purchaser to constitute the same percentage (rounded up to the next whole number) as is on the Company Board of Directors of the members of (I) each committee of the Company Board of Directors, (II) each board of directors (or similar body) of each Company Subsidiary, and (III) each committee (or similar body) of each such board of directors (or similar body), in each case to the extent permitted by applicable law and the then applicable NASDAQ Marketplace Rules. From and after the Acceptance Time and until the Effective Time, the Company shall take all action necessary to elect to be treated as a “ controlled company ” as defined by NASDAQ Marketplace Rule 4350(c)(5) if applicable and make all necessary filings and disclosures associated with such status. The Company shall promptly upon execution of this Agreement take all actions required pursuant to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order to fulfill its obligations under this Section 1.3(a), including mailing to shareholders (together with the Schedule 14D-9) the information required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder to enable Purchaser’s designees to be appointed to the Company Board of Directors. Purchaser shall supply the Company with information with respect to Purchaser’s designees and Parent’s and Purchaser’s respective officers, directors and affiliates to the extent required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder.

(b) In the event that Purchaser’s designees are appointed to the Company Board of Directors pursuant to Section 1.3(a), then, until the Effective Time, the Company shall cause the Company Board of Directors to maintain at least such number of “ independent directors ,” as defined by the NASDAQ Marketplace Rules, as may be required by the applicable NASDAQ Marketplace Rules or the federal securities laws, at least one of whom shall be an “ audit committee financial expert ,” as defined in Item 401(h) of SEC Regulation S-K and the instructions thereto (any such “independent directors” as of the date of this Agreement (and their successors as provided below), the “ Continuing Directors ”); provided , however , that if any Continuing Director is unable to serve due to death, disability or resignation, the Company, Purchaser and Parent shall take all necessary action (including creating a committee of the Company Board of Directors) so that the entire Company Board of Directors shall be entitled to appoint another Person or Persons to fill such vacancy or vacancies, and such Person or Persons thereafter shall be deemed to be a Continuing Director for purposes of this Agreement, provided , however , that if a majority of the Continuing Directors then in office did not approve such Person or Persons, then such Person or Persons shall not be deemed to be a Continuing Director. If no Continuing Director then remains, the other directors shall

 

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appoint Persons to fill such vacancies and such Persons shall be deemed Continuing Directors for all purposes of this Agreement. Notwithstanding anything in this Agreement to the contrary, if Purchaser’s designees constitute a majority of the Company Board of Directors after the Acceptance Time and prior to the Effective Time, then the affirmative vote of a majority of the Continuing Directors shall (in addition to the approval rights of the Company Board of Directors or the shareholders of the Company as may be required by the Amended and Restated Articles of Incorporation of the Company, as amended (the “ Company Charter ”), the Amended and Restated Bylaws of the Company (the “ Company Bylaws ”, and together with the Company Charter, the “ Company Governing Documents ”) or applicable law) be required (i) for the Company to amend or terminate this Agreement, (ii) to exercise or waive any of the Company’s rights, benefits or remedies hereunder, or to take any action hereunder, or (iii) to amend the Company Governing Documents, in each case if such action adversely affects, or reasonably could adversely affect, the holders of Shares (other than Parent or Purchaser); provided , that Purchaser and Parent shall take all actions as may be necessary to give effect to the foregoing. At all times subsequent to the date of this Agreement and prior to the Effective Time, the Continuing Directors (including those directors deemed to be Continuing Directors by virtue of this Section 1.3) shall, without any further action by the Company or the Company Board of Directors, constitute a committee of the Company Board of Directors (which committee of the Company Board of Directors has been established as of the date of this Agreement by action of the Company Board of Directors) and all actions contemplated by this Agreement to be taken by the Continuing Directors or a designated percentage of the Continuing Directors shall be taken, and shall be deemed to have been taken, by such Continuing Directors acting as a committee of the Company Board of Directors.

Section 1.4 Option to Acquire Additional Shares.

(a) The Company hereby grants to Purchaser an option (the “ Top-Up Option ”), exercisable in accordance with this Section 1.4, to purchase the number of Shares (the “ Top-Up Option Shares ”) equal to the number of shares of Common Stock that, when added to the number of shares of Common Stock owned by Purchaser immediately prior to the exercise of the Top-Up Option, shall constitute one share more than 90% of the number of Shares then outstanding (after giving effect to the issuance of the Top-Up Option Shares) for a purchase price per Top-Up Option Share equal to the Offer Price; provided , however , that (i) the Top-Up Option shall be exercisable only once, at such time as Parent and Purchaser, directly or indirectly, own at least 50% of the total number of Shares then outstanding and on or prior to the 20th business day after the Expiration Date and has otherwise purchased all Shares validly tendered in the Offer; (ii) in no event shall the Top-Up Option be exercisable for a number of Shares in excess of the lesser of (x) the Company’s then authorized and unissued Shares (excluding as authorized and unissued shares of Common Stock, for purposes of this Section 1.4, any Shares reserved for issuance) or (y) the maximum number of Shares issuable without shareholder approval pursuant to any NASDAQ National Market rules then applicable the Company; (iii) Purchaser shall, concurrently with the exercise of the Top-Up Option, give written notice to the Company that as promptly as practicable following such exercise, Purchaser intends to consummate the Merger; (iv) the Top-Up Option may not be exercised if any provision of applicable law or any judgment, injunction, order or decree of any Governmental Entity shall prohibit, or require any action, consent, approval, authorization or permit of, action by, or filing with or notification to, any Governmental Entity or the Company’s shareholders in connection with the exercise of the Top-Up Option or the delivery of the Top-Up Shares in respect of such exercise, which action, consent, approval, authorization or permit, action, filing or notification has not theretofore been obtained or made, as applicable; and (v) the Top-Up Option may not be exercised unless, immediately after such exercise and issuance of the Top-Up Option Shares, Purchaser will hold at least one share more than 90% of the number of Shares then outstanding. The Top-Up Option shall terminate concurrently with the termination of this Agreement. The parties shall cooperate to ensure that the issuance of the Top-Up Option Shares is accomplished in a manner consistent with all applicable law, including compliance with an applicable exemption from registration of the Top-Up Option Shares under the Securities Act.

 

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(b) If Purchaser wishes to exercise the Top-Up Option, Purchaser shall send written notice to the Company specifying the place for the closing of the purchase of the Top-Up Option Shares (the “ Top-Up Closing ”), and a date not earlier than one business day or later than five business days after the date of such notice. At the Top-Up Closing, subject to the terms and conditions of this Agreement, (i) the Company shall deliver to Purchaser a certificate or certificates indicating the applicable number of Top-Up Option Shares, and (ii) Purchaser shall purchase each Top-Up Option Share from the Company at the Offer Price. Payment by Purchaser of the purchase price for the Top-Up Option Shares will be made by delivery of immediately available funds by wire transfer to an account designated by the Company.

(c) Parent and Purchaser acknowledge that the Top-Up Option Shares that Purchaser may acquire upon exercise of the Top-Up Option will not be registered under the Securities Act, and will be issued in reliance upon an exemption thereunder for transactions not involving a public offering. Parent and Purchaser represent and warrant to the Company that Purchaser is, or will be upon the purchase of the Top-Up Option Shares, an “accredited investor”, as defined in Rule 501 of Regulation D under the Securities Act. Purchaser agrees that the Top-Up Option and the Top-Up Option Shares to be acquired upon exercise of the Top-Up Option are being and will be acquired by Purchaser for the purpose of investment and not with a view to, or for resale in connection with, any distribution thereof in violation of the Securities Act.

Section 1.5 The Merger. Subject to the terms and conditions of this Agreement, and in accordance with the MBCA, at the Effective Time the Company and Purchaser shall consummate the Merger pursuant to which (a) Purchaser shall be merged with and into the Company and the separate corporate existence of Purchaser shall thereupon cease, (b) the Company shall be the surviving corporation in the Merger and shall continue to be governed by the MBCA, and (c) the separate corporate existence of the Company with all its rights, privileges, immunities, powers and franchises shall continue unaffected by the Merger. The corporation surviving the Merger is sometimes referred to herein as the “ Surviving Corporation .” The Merger shall have the effects set forth in the MBCA.

Section 1.6 Effective Time. Parent, Purchaser and the Company shall cause appropriate articles of merger (the “ Articles of Merger ”) to be executed and filed on the Closing Date (or on such other date as Parent and the Company may agree) with the Secretary of State of the State of Minnesota in accordance with the relevant provisions of the MBCA. The Merger shall become effective at the time the Articles of Merger are filed with the Secretary of State of the State of Minnesota or at such later date and time as is agreed upon by the parties hereto and specified in the Articles of Merger. The date and time at which the Merger shall become effective is referred to as the “ Effective Time .”

Section 1.7 Closing. The closing of the Merger (the “ Closing ”) will take place at 10:00 a.m., Minneapolis time, on a date to be specified by the parties hereto, such date to be no later than the second business day after satisfaction or waiver of all of the conditions set forth in Article VII (the “ Closing Date ”), at Faegre & Benson LLP, 90 South Seventh Street, Minneapolis, Minnesota 55402, unless another date, time or place is agreed to in writing by the parties hereto.

Section 1.8 Directors and Officers of the Surviving Corporation. The directors of Purchaser immediately prior to the Effective Time shall, from and after the Effective Time, be the directors of the Surviving Corporation, and the officers of the Company immediately prior to the Effective Time shall continue as the officers of the Surviving Corporation from and after the Effective Time, in each case until their respective successor has been duly appointed and qualified, or until their earlier death, resignation or removal in accordance with the Surviving Corporation’s articles of incorporation and bylaws. The Company shall use all reasonable efforts to cause all directors of the Company, other than those directors, if any, as shall be designated by Parent or Purchaser in writing prior to the Effective Time, to resign immediately before the Effective Time.

Section 1.9 Subsequent Actions. If at any time after the Effective Time the Surviving Corporation shall determine, in its sole discretion, that any deeds, bills of sale, instruments of conveyance, assignments, assurances or other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in the

 

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Surviving Corporation its right, title or interest in, to or under any of the rights, properties or assets of either of the Company or Purchaser acquired or to be acquired by the Surviving Corporation as a result of, or in connection with, the Merger, or otherwise to carry out this Agreement and the Transactions, then the officers and directors of the Surviving Corporation shall be authorized to execute and deliver, in the name and on behalf of either the Company or Purchaser, all such deeds, bills of sale, instruments of conveyance, assignments and assurances and to take and do, in the name and on behalf of each such corporation or otherwise, all such other actions and things as may be necessary or desirable to vest, perfect or confirm of record or otherwise any and all right, title or interest in, to and under such rights, properties or assets in the Surviving Corporation, or otherwise to carry out this Agreement and the Transactions.

Section 1.10 Shareholders’ Meeting. If approval of the shareholders of the Company is required under the MBCA to consummate the Merger:

(a) As promptly as practicable following the Acceptance Time and the expiration of any subsequent offering period provided by Purchaser pursuant to and in accordance with this Agreement, if applicable, and in any event within 14 days after the Acceptance Time and the expiration of such subsequent offering period provided by Purchaser pursuant to and in accordance with this Agreement, the Company shall prepare and file with the SEC in preliminary form a proxy or information statement for the Special Meeting (together with any amendments thereof or supplements thereto and any other required solicitation materials or information, the “ Proxy Statement ”) relating to the Merger and this Agreement; provided , that Parent, Purchaser and their counsel shall be given a reasonable opportunity to review the Proxy Statement before it is filed with the SEC and the Company shall give due consideration to all reasonable additions, deletions or changes thereto suggested by Parent, Purchaser and their counsel. Subject to the provisions of Section 5.4(c), the Company shall include in the Proxy Statement the recommendation of the Company Board of Directors that shareholders of the Company vote in favor of the approval and adoption of this Agreement in accordance with the MBCA. The Company shall use its reasonable best efforts to obtain and furnish the information required to be included by the SEC in the Proxy Statement and, after consultation with Purchaser, respond promptly to any comments made by the SEC with respect to the Proxy Statement. The Company shall provide Parent, Purchaser and their counsel with copies of any written comments, and shall inform them of any oral comments, that the Company or its counsel may receive from time to time from the SEC or its staff with respect to the Proxy Statement promptly after the Company’s receipt of such comments, and any written or oral responses thereto. Parent, Purchaser and their counsel shall be given a reasonable opportunity to review any such written responses and the Company shall give due consideration to all reasonable additions, deletions or changes thereto suggested by Parent, Purchaser and their counsel. The Company, Parent and Purchaser agree to correct promptly any information in the Proxy Statement if and to the extent that it shall have become false or misleading in any material respect or as otherwise required by applicable law, and the Company further agrees to cause the Proxy Statement, as so corrected (if applicable), to be filed with the SEC and, if any such correction is made following the mailing of the Proxy Statement as contemplated by Section 1.10(b)(ii), mailed to holders of Shares, in each case as and to the extent required by the Exchange Act or the SEC (or its staff). The Company shall use its reasonable best efforts to obtain from its shareholders the approval of the shareholders of the Company in favor of the adoption and approval of this Agreement and the consummations the Transactions.

(b) The Company, acting through (or upon authorization by) the Company Board of Directors, shall, in accordance with and subject to the requirements of the Company Governing Documents and applicable law:

(i)(A) as promptly as practicable following the Acceptance Time and the expiration of any subsequent offering period provided by Purchaser pursuant to and in accordance with this Agreement, if applicable, duly set a record date for, call and give notice of a special meeting of its shareholders (the “ Special Meeting ”) for the purpose of considering and taking action upon this Agreement (with the record date and meeting date set in consultation with Purchaser), and (B) as promptly as practicable following the Acceptance Time and the expiration of any subsequent offering period provided by Purchaser pursuant to and in accordance with this Agreement, if applicable, convene and hold the Special Meeting;

 

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(ii) cause the definitive Proxy Statement to be mailed to its shareholders as promptly as practicable after the date that the SEC staff advises that it has no further comments thereon or that the Company may commence mailing the Proxy Statement; and

(iii) use its reasonable best efforts to secure any approval in favor of the approval and adoption of the Agreement by the shareholders of the Company that is required by the Company Governing Documents and the MBCA and any other applicable law to effect the Merger, including reaffirming its recommendation for approval and adoption of the Agreement at the Special Meeting.

(c) At the Special Meeting or any postponement or adjournment thereof, Parent shall vote, or cause to be voted, all of the Shares then owned by it, Purchaser or any of their respective affiliates in favor of the approval and adoption of this Agreement and to deliver or provide, in its capacity as a shareholder of the Company or otherwise, any other approvals that are required by the MBCA and any other applicable law to effect the Merger.

Section 1.11 Merger Without Meeting of Shareholders. Notwithstanding the terms of Section 1.10, in the event that Parent, Purchaser and their respective related organizations (as defined in Section 302A.011, Subd. 25, of the MBCA) shall own, in the aggregate, at least 90% of the outstanding Shares (the “ Short-Form Threshold ”), following the Acceptance Time and the expiration of any subsequent offering period provided by Purchaser pursuant to and in accordance with this Agreement, if applicable, Parent shall cause the Merger to become effective as promptly as practicable thereafter, without a meeting of shareholders of the Company, in accordance with Section 302A.621 of the MBCA.

ARTICLE II

CONVERSION OF SECURITIES

Section 2.1 Conversion of Capital Stock. At the Effective Time, by virtue of the Merger and without any action on the part of the holders of any securities of the Company or membership interests of Purchaser (the “ Purchaser Membership Interests ”), the manner and basis of converting the Shares and the Purchaser Membership Interests shall be as follows:

(a) Each share of Purchaser Membership Interests issued and outstanding immediately prior to the Effective Time shall be converted into and become one validly issued, fully paid and nonassessable share of common stock, par value $0.01 per share, of the Surviving Corporation, which will constitute the only issued and outstanding shares of capital stock of the Surviving Corporation immediately after the Effective Time.

(b) All Shares that are owned by Parent, Purchaser or any of their respective Subsidiaries or by any Company Subsidiary shall be cancelled and shall cease to exist, and no consideration shall be delivered in exchange therefor.

(c) Each Share (other than Shares to be cancelled in accordance with Section 2.1(b) and other than Dissenting Shares) issued and outstanding immediately prior to the Effective Time, shall be converted into the right to receive the Offer Price, payable to the holder thereof in cash, without interest, subject to deduction for any required withholding of Tax (the “ Merger Consideration ”). From and after the Effective Time, all such Shares shall no longer be outstanding and shall automatically be cancelled and shall cease to exist, and each holder of a certificate formerly representing any such Shares shall cease to have any rights with respect thereto, other than the right to receive the Merger Consideration therefor upon the surrender of such certificate in accordance with Section 2.2.

(d) The Merger Consideration shall be adjusted appropriately in the event the Company changes the number of Shares, or securities convertible or exchangeable into or exercisable for Shares, issued and outstanding immediately prior to the Effective Time as a result of a stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into the Common Stock), cash

 

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dividend, reorganization, recapitalization, reclassification, combination or other like change with respect to the Common Stock occurring on or after the date of this Agreement and prior to the Effective Time.

Section 2.2 Exchange of Certificates.

(a) Prior to the Effective Time, Parent shall designate a bank or trust company that is reasonably acceptable to the Company to act as the payment agent in connection with the Merger (the “ Paying Agent ”). Prior to the Effective Time, Parent or Purchaser shall deposit, or cause to be deposited, with the Paying Agent, for the benefit of the holders of Shares, cash in an amount sufficient to pay the aggregate Merger Consideration required to be paid pursuant to this Agreement (such cash being referred to as the “ Payment Fund ”). The Payment Fund shall be invested by the Paying Agent as directed by Parent; provided , that such investment shall be in (i) direct obligations of, or guaranteed by, the United States of America, (ii) obligations for which the full faith and credit of the United States of America is pledged to provide for payment of all principal and interest, or (iii) commercial paper obligations rated A-1 or P-1 or better by Moody’s Investors Service, Inc. or Standard & Poor’s Corporation, respectively, certificates of deposit, bank repurchase agreements or banker’s acceptances of commercial banks with capital exceeding $1 billion, or money market funds having a rating in the highest investment category granted by a recognized credit rating agency at the time of acquisition, pending payment thereof by the Paying Agent to the holders of the Shares; provided , that no gain or loss thereon shall affect the amounts payable to the holders of Shares following the Effective Time and Parent shall promptly deposit additional cash into the Payment Fund in an amount that is equal to the deficiency in the amount of cash required to satisfy fully all such cash payment obligations. Earnings (including interest and other income) resulting from such investments shall be the sole and exclusive property of Parent, and no part of such earnings shall accrue to the benefit of holders of Shares.

(b) The Paying Agent shall, within two business days following the Effective Time, mail to each holder of record of a certificate or certificates that immediately prior to the Effective Time represented outstanding Shares (the “ Certificates ”) and whose Shares were converted pursuant to Section 2.1(c) into the right to receive the Merger Consideration (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Paying Agent and shall be in such customary form and have such other provisions as Parent may reasonably specify) and (ii) instructions for effecting the surrender of the Certificates in exchange for payment of the Merger Consideration. Upon surrender of a Certificate for cancellation to the Paying Agent or to such other agent or agents as may be appointed by Parent in accordance with the terms of the letter of transmittal, together with such letter of transmittal, duly executed, the holder of such Certificate shall be entitled to receive in exchange therefor the Merger Consideration for each Share formerly represented by such Certificate and the Certificate so surrendered shall forthwith be cancelled. Such payment shall be made to the holder of record within two business days of receipt of a duly executed letter of transmittal by the Paying Agent and shall be made by either bank check or electronic wire transfer, at the option of the holder of record. No interest will be paid or accrued on any amount payable upon due surrender of the Certificates. If payment of the Merger Consideration is to be made to a Person other than the Person in whose name the surrendered Certificate is registered, it shall be a condition precedent to payment that (x) the Certificate so surrendered shall be properly endorsed or otherwise shall be in proper form for transfer and (y) the Person requesting such payment shall have paid any transfer and other similar Taxes required by reason of the payment of the Merger Consideration to a Person other than the registered holder of the Certificate surrendered or shall have established to the satisfaction of the Surviving Corporation that such Tax either has been paid or is not required to be paid. Until surrendered as contemplated by this Section 2.2, each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive the Merger Consideration in cash as contemplated by this Section 2.2.

(c) At the Effective Time, the stock transfer books of the Company shall be closed and thereafter there shall be no further registration of transfers of Shares that were outstanding immediately prior to the Effective Time on the records of the Company. From and after the Effective Time, the holders of Certificates outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such Shares except as otherwise provided for in this Agreement or by applicable law. If, after the

 

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Effective Time, Certificates are presented to the Surviving Corporation, Parent or the Paying Agent for any reason, then such Certificates shall be cancelled and exchanged as provided in this Article II.

(d) At any time following six months after the Effective Time, the Paying Agent shall deliver to Parent any portion of the Payment Fund (including any proceeds of any investment thereof) made available to the Paying Agent and not disbursed (or for which disbursement is pending) to holders of Certificates, and thereafter such holders shall be entitled to look only to the Surviving Corporation (subject to abandoned property, escheat or other similar laws) and only as general creditors thereof with respect to the Merger Consideration payable upon due surrender of their Certificates, together with a duly executed letter of transmittal, without any interest thereon. Notwithstanding the foregoing, none of the Surviving Corporation, Parent, the Paying Agent or any other Person shall be liable to any holder of a Certificate for any amount properly delivered to a public official pursuant to any applicable abandoned property, escheat or similar law.

(e) Notwithstanding anything in this Agreement to the contrary, Parent, Purchaser, the Surviving Corporation and the Paying Agent, as the case may be, shall each be entitled to deduct and withhold from the relevant Merger Consideration, Offer Price or any other amounts otherwise payable pursuant to this Agreement to any holder of Shares such amounts that Parent, Purchaser, the Surviving Corporation or the Paying Agent, as the case may be, is required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code of 1986, as amended (the “ Code ”), the rules and regulations promulgated thereunder or any provision of applicable state, local or foreign law. To the extent that amounts are so withheld by Parent, Purchaser, the Surviving Corporation or the Paying Agent, case the case may be, such amounts shall be treated for all purposes of this Agreement as having been paid to the holder of Shares in respect of which such deduction and withholding was made.

(f) In the event that any Certificates shall have been lost, stolen or destroyed, the Paying Agent shall make payment in exchange for such lost, stolen or destroyed Certificates, upon the making of an affidavit of that fact by the holder thereof, the Merger Consideration payable in respect thereof pursuant to Section 2.1; provided , however , that Parent may, in its discretion and as a condition precedent to the payment of such Merger Consideration, require the owners of such lost, stolen or destroyed Certificates to deliver a written indemnity agreement reasonably satisfactory to Parent and, if reasonably deemed advisable by Parent, a bond in such sum as Parent may reasonably direct as indemnity against any claim that may be made against Parent, the Surviving Corporation or the Paying Agent with respect to the Certificates alleged to have been lost, stolen or destroyed.

Section 2.3 Dissenting Shares.

(a) Notwithstanding anything in this Agreement to the contrary, Shares outstanding immediately prior to the Effective Time and held of record or beneficially by a Person who has not voted in favor of approval and adoption of this Agreement and who is entitled to demand and properly demands appraisal of such Shares (“ Dissenting Shares ”) pursuant to, and who complies in all respects with, Sections 302A.471 and 302A.473 of the MBCA (the “ Appraisal Rights ”), shall not be converted into or represent the right to receive the Merger Consideration for such Dissenting Shares but instead shall be entitled to payment of the fair value (including interest determined in accordance with Section 302A.473 of the MBCA) of such Dissenting Shares in accordance with the Appraisal Rights; provided , however , that if any such holder shall fail to perfect or otherwise shall waive, withdraw or lose the right to dissent under the Appraisal Rights, then the right of such holder to be paid the fair value of such holder’s Dissenting Shares shall cease and such Dissenting Shares shall be deemed to have been converted as of the Effective Time into, and to have become exchangeable solely for the right to receive, the Merger Consideration.

(b) The Company shall serve prompt notice to Parent of any demands received by the Company for Appraisal Rights with respect to any Shares, withdrawals of such demands and any other instruments served on the Company in relation to the Dissenting Shares or Appraisal Rights, and Purchaser shall have the right to participate in all negotiations and proceedings with respect to such demands. Prior to the Effective Time, the Company shall not, without the prior written consent of Parent, make any payment with respect to, or settle or compromise or offer to settle or compromise, any such demand, or agree to do any of the foregoing.

 

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Section 2.4 Treatment of Options, Stock Appreciation Units, Restricted Stock and the ESPP.

(a) To the extent requested by Parent prior to the Effective Time, the Company shall terminate the Company Stock Plans effective immediately prior to the Effective Time. As of the Effective Time, by virtue of the Merger and without any action on the part of the holders thereof, (i) each holder of an option to purchase Shares, whether granted under the Company Stock Plans or otherwise, other than an option granted under the ESPP, that is outstanding and unexercised at the Effective Time (whether vested or unvested) (each, a “ Company Option ”) shall be entitled to receive from the Surviving Corporation immediately after the Effective Time, in exchange for the cancellation of such Company Option, an amount in cash, without interest, equal to the excess, if any, of (1) the Merger Consideration over (2) the per share exercise price of such Company Option, multiplied by the number of Shares subject to such Company Option as of the Effective Time (the “ Option Cash Payment ”) and (ii) each Company Option shall cease to represent an option to purchase Shares, shall no longer be outstanding and shall automatically cease to exist and each holder of a Company Option shall cease to have any rights with respect thereto, except the right to receive the Option Cash Payment.

(b) Upon consummation of the Offer, each stock appreciation unit or right referencing, based on or with respect to, the Shares, whether granted under the Company Stock Plans or otherwise and whether settled in Shares or cash that is outstanding and unexercised upon the consummation of the Offer (whether vested or unvested) (each, a “ Stock Appreciation Unit ”) shall be cancelled and, in exchange for such cancellation, each holder of a cancelled Stock Appreciation Unit shall be entitled to receive from the Surviving Corporation immediately after the Effective Time, in exchange for the cancellation of such Stock Appreciation Unit, an amount in cash, without interest, equal to the excess, if any, of (i) the Merger Consideration over (ii) the base price per share of such Stock Appreciation Unit, multiplied by the number of Shares subject to such Stock Appreciation Unit as of consummation of the Offer (the “ SAR Cash Payment ”) and as of the consummation of the Offer each Stock Appreciation Unit shall cease to represent a unit or right with respect to the Shares, shall no longer be outstanding and shall automatically cease to exist, and each holder shall cease to have any rights with respect thereto, except the right to receive the SAR Cash Payment.

(c) The Company shall take all actions necessary so that each share of Restricted Stock which is outstanding immediately prior to the Effective Time shall vest as of the Effective Time and at the Effective Time the holder thereof shall, subject to this Article II, be entitled to receive the Merger Consideration in accordance with Section 2.1(c).

(d) All amounts payable pursuant to this Section 2.4 shall be paid without interest and shall be net of all applicable withholding Taxes that Parent, Purchaser, the Surviving Corporation and the Paying Agent, as the case may be, shall be required to deduct and withhold with respect to the making of such payment under the Code, the rules and regulations promulgated thereunder or any provision of applicable state, local or foreign law. To the extent that amounts are so withheld by Parent, Purchaser, the Surviving Corporation or the Paying Agent, such amounts shall be treated for all purposes of this Agreement as having been paid to the holders of the Company Options, Stock Appreciation Units and/or Restricted Stock, as applicable, in respect of which such deduction and withholding was made by Parent, Purchaser, the Surviving Corporation or the Paying Agent.

(e) The Company shall not (i) commence any new purchase periods under the Company’s Employee Stock Purchase Plan (the “ ESPP ”) after the date of this Agreement or (ii) permit participants in the purchase period in effect on the date of this Agreement to increase the rate of payroll deductions with respect to such purchase period following the date of this Agreement.

(f) The Company shall amend each Company Stock Plan to preclude any automatic or formulaic grant of options or other awards thereunder on or after the date hereof.

(g) Prior to the Effective Time, and except as provided in Section 3.2(c) of the Company Disclosure Schedule, the Company and the Company Board of Directors shall take all actions necessary to effectuate the provisions of this Section 2.4.

 

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ARTICLE III

REPRESENTATIONS AND WARRANTIES

OF THE COMPANY

Except as set forth in (i) the Company’s disclosure schedule delivered to Parent immediately prior to the execution of this Agreement (the “ Company Disclosure Schedule ”) or (ii) the Company SEC Documents filed with or furnished to the SEC before the date of this Agreement (to the extent such disclosure does not constitute a risk factor (other than factual information contained in any such risk-factor disclosure)), the Company represents and warrants to Parent and Purchaser as set forth below. Each disclosure set forth in the Company Disclosure Schedule is identified by reference to, or has been grouped under a heading referring to, a specific section of this Agreement and disclosure made pursuant to any section thereof shall be deemed to be disclosed on each of the other sections of the Company Disclosure Schedule to the extent the applicability of the disclosure to such other section is reasonably apparent from the disclosure made.

Section 3.1 Organization.

(a) The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Minnesota and has the requisite corporate power and authority to own, lease and operate its properties and assets and to conduct its business as now being conducted. The Company is duly qualified or licensed to do business and is in good standing (with respect to jurisdictions which recognize such concept) in each jurisdiction in which the nature of its business or the ownership, leasing or operation of its properties makes such qualification or licensing necessary, except for those jurisdictions where the failure to be so qualified or licensed or to be in good standing would not have, individually or in the aggregate, a Company Material Adverse Effect. The Company previously has provided or made available to Parent and Purchaser prior to the execution of this Agreement true and complete copies of the Company Governing Documents. The Company is in compliance with the terms of the Company Governing Documents and all Company Governance Documents are in full force and effect.

(b) Each of the Company’s Subsidiaries (the “ Company Subsidiaries ”), together with the jurisdiction of organization of each such Company Subsidiary, is listed on Section 3.1(b) of the Company Disclosure Schedule. Each Company Subsidiary is a corporation, partnership, limited liability company, trust or other organization duly incorporated or organized, validly existing and, to the extent applicable, in good standing (with respect to jurisdictions which recognize such concept) under the laws of the jurisdiction of its incorporation or organization, except where the failure to be so incorporated, organized, validly existing or in good standing would not have, individually or in the aggregate, a Company Material Adverse Effect. Each of the Company Subsidiaries has the requisite corporate, limited partnership, limited liability company or similar power and authority to own, lease and operate its properties and to carry on its business as it is now being conducted, except where the failure to have such power and authority would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. The Company is, directly or indirectly, the record and beneficial owner of all of the outstanding shares of capital stock or other Equity Interests of each of the Company Subsidiaries free and clear of any Liens. Other than the Company Subsidiaries, neither the Company nor any Company Subsidiary owns, directly or indirectly, any equity or other ownership interest in any Person.

Section 3.2 Capitalization.

(a) The authorized capital stock of the Company consists of 30,000,000 shares of Common Stock and 5,000,000 shares of undesignated capital stock, (the “ Undesignated Stock ”). As of July 31, 2008, 21,408,901 shares of Common Stock were outstanding and no shares of Undesignated Stock were issued and outstanding.

(b) As of July 31, 2008, 1,433,958 shares of Common Stock were reserved for issuance under the Company Stock Plans (exclusive of Company Options and Stock Appreciation Units disclosed on Section 3.2(c) of the Company Disclosure Schedule).

 

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(c) Section 3.2(c) of the Company Disclosure Schedule sets forth a complete and accurate list, as of the date of this Agreement, of all Company Stock Plans, all outstanding Company Options, Stock Appreciation Units and Restricted Stock, including the name of the holder, the name of the relevant Company Stock Plan, the number of Shares subject thereto, the date of grant and the exercise or base price, as applicable. All of the outstanding shares of the Common Stock have been, and all Shares that may be issued pursuant to the exercise of outstanding Company Options will be, when issued in accordance with the terms thereof, duly authorized, validly issued, fully paid and non-assessable. No Shares may be issued pursuant to the exercise of any Stock Appreciation Units. Other than the Company Options, Restricted Stock and Stock Appreciation Units that are set forth on Schedule 3.2(c), no other equity-based awards are held by any current or former officers, directors, employees or independent contractors of the Company or any Company Subsidiary. Consent of the holders of Company Options or Stock Appreciation Units is not required to effectuate the cancellation and exchange of Company Options and Stock Appreciation Units contemplated by Section 2.4.

(d) As of the date of this Agreement:

(i) except as set forth in Section 3.2(d)(i) of the Company Disclosure Schedule, there are no shares of capital stock or partnership interests of any Company Subsidiary authorized, designated, issued or outstanding;

(ii) except as set forth in Section 3.2(d)(ii) of the Company Disclosure Schedule, there are no (x) options, warrants, restricted stock, restricted stock units, stock appreciation rights or units, calls, preemptive rights, subscriptions or other rights, agreements, arrangements or commitments of any kind relating to the issued or unissued capital stock of the Company or any Company Subsidiary, obligating the Company or any Company Subsidiary to issue, transfer or sell or cause to be issued, transferred or sold any shares of capital stock or Voting Debt of, or other equity interest in, the Company or any Company Subsidiary or any securities convertible or exchangeable into or exercisable for such shares or equity interests, or obligating the Company or any Company Subsidiary to grant, extend or enter into any such option, warrant, restricted stock, restricted stock unit, stock appreciation rights or units, call, preemptive right, subscription or other right, agreement, arrangement or commitment (together with any other equity interest of the Company or any Company Subsidiary, collectively, “ Equity Interests ”) or (y) outstanding contractual obligations of the Company or any Company Subsidiary to repurchase, redeem or otherwise acquire any Shares or any capital stock of, or other Equity Interests in, the Company or any Company Subsidiary or to provide funds to make any investment (in the form of a loan, capital contribution or otherwise) in the Company or any Company Subsidiary;

(iii) except as set forth in Section 3.2(d)(iii) of the Company Disclosure Schedule, there are no rights, agreements or arrangements of any character which provide for any stock appreciation or similar right or grant any right to share in the equity, income, revenue or cash flow of the Company or any Company Subsidiary;

(iv) there are no bonds, debentures, notes or other indebtedness having general voting rights (or convertible or exchangeable into or exercisable for securities having such rights) (“ Voting Debt ”) of the Company or any Company Subsidiary issued and outstanding; and

(v) there are no voting trusts or other agreements to which the Company is a party with respect to the voting of the Company’s Common Stock.

Section 3.3 Indebtedness. Except as set forth in Section 3.3 of the Company Disclosure Schedule, no Indebtedness of the Company or any of the Company Subsidiaries contains any restriction upon (A) the prepayment of any of such Indebtedness, (B) the incurrence of Indebtedness by the Company or any of the Company Subsidiaries, or (C) the ability of the Company or any of the Company Subsidiaries to grant any lien on its properties or assets. As used in this Agreement, “ Indebtedness ” means (1) all indebtedness for borrowed money, (2) any other indebtedness that is evidenced by a note, bond, debenture or similar instrument, (3) all obligations under capital leases, (4) all obligations in respect of outstanding letters of credit and (5) all guarantee obligations.

 

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Section 3.4 Authorization; Validity of Agreement; Company Action. The Company has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Transactions. The execution, delivery and performance by the Company of this Agreement, and the consummation by it of the Transactions, have been duly and validly authorized by the Company Board of Directors and no other corporate proceedings on the part of the Company is necessary to authorize this Agreement or the Transactions, except as set forth in this Agreement. This Agreement has been duly executed and delivered by the Company and, assuming due and valid authorization, execution and delivery hereof by Parent and Purchaser, is a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except that (a) such enforcement may be subject to applicable bankruptcy, insolvency or other similar laws, now or hereafter in effect, affecting creditors’ rights generally and (b) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.

Section 3.5 Board Approvals.

(a) The Company Board of Directors, at a meeting duly called and held, has

(i) determined that this Agreement, the Offer, the Merger and the other Transactions are advisable and in the best interests of the Company and the shareholders of the Company;

(ii) approved and taken all corporate action required to be taken by the Company Board of Directors to authorize the consummation of the Transactions;

(iii) approved this Agreement and the Transactions (including the Offer and the Merger); and

(iv) recommended that the shareholders of the Company accept the Offer, tender their Shares to Purchaser pursuant to the Offer, and approve and adopt this Agreement if required by the MBCA to approve and adopt this Agreement.

(b) A committee of disinterested directors of the Company Board of Directors, at a meeting duly called and held, has

(i) approved this Agreement and the Transactions (including the Offer and the Merger), which approval, to the extent applicable, constituted approval under the provisions of Sections 302A.011, Subd. 38(h), and 302A.673, Subd. 1, of the MBCA, as a result of which this Agreement and the Transactions, including the Offer and the Merger and the other Transactions, are not and will not be subject to the restrictions on control share acquisitions or business combinations under the provisions of Sections 302A.671 and 302A.673, respectively, of the MBCA; and

(ii) recommended to the Company Board of Directors that the Company Board of Directors approve this Agreement and the Transactions (including the Offer and the Merger).

(c) No further corporate action is required by the Company Board of Directors, pursuant to the MBCA or otherwise, in order for the Company to approve and adopt this Agreement or approve the Transactions, including the Offer and the Merger, subject, in the case of the Merger, to the approval and adoption of this Agreement by the holders of a majority of the outstanding Shares, if required by applicable law, as contemplated by Section 1.10, which is the only vote of the Company shareholders that may be required for approval and adoption of this Agreement and the consummation of the Merger by the Company.

Section 3.6 Consents and Approvals; No Violations. None of the execution, delivery or performance of this Agreement by the Company, the acceptance for payment or acquisition of Shares pursuant to the Offer, the consummation by the Company of the Merger or any other Transactions or compliance by the Company with any of the provisions of this Agreement will:

(a) violate or conflict with or result in any breach of any provision of the Company Governing Documents or the comparable governing documents of any Company Subsidiary;

 

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(b) except as set forth in Section 3.6 of the Company Disclosure Schedule, require any notice, report or other filing by the Company with, or the permit, authorization, registration, consent or approval of, any court, arbitral tribunal, administrative agency or commission or other governmental or other regulatory authority or agency, or foreign, federal, state, local or supranational entity (a “ Governmental Entity ”), except for (i) compliance with any applicable requirements of the Exchange Act, (ii) any filings as may be required under the MBCA or Chapter 80B of the Minnesota Statutes in connection with the Transactions, and (iii) the filing with the SEC and other regulatory approvals and filings which may be required of (A) the Schedule 14D-9, (B) a Proxy Statement if shareholder approval of the Merger is required by applicable law, (C) the information required by Rule 14f-1 promulgated under the Exchange Act, and (D) such reports under Section 13(a) of the Exchange Act as may be required in connection with this Agreement, the Offer and the Merger;

(c) except as set forth in Section 3.6 of the Company Disclosure Schedule, automatically result in a modification, violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any right, including any right of termination, amendment, cancellation or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, Lien, indenture, lease, license, contract or agreement, or other instrument or obligation to which the Company or any of the Company Subsidiaries is a party or by which the Company or any of the Company Subsidiaries or any of their respective properties or assets is bound (the “ Company Agreements ”); or

(d) violate any order, writ, judgment, injunction, decree, statute, rule or regulation applicable to the Company or any of the Company Subsidiaries or any of their respective properties or assets;

except in the case of clauses (b), (c) or (d) where (x) any failure to obtain such permits, authorizations, registrations, consents or approvals, (y) any failure to make such notices, reports or filings or (z) any such modifications, violations, rights, breaches or defaults have not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect or have a material adverse effect on the ability of the Company to consummate the Offer, the Merger and the other Transactions.

Section 3.7 Company SEC Documents and Financial Statements.

(a) The Company has filed with or furnished to (as applicable) the SEC all required forms, reports, schedules, statements and other documents since and including January 1, 2005, under the Exchange Act or the Securities Act of 1933, as amended (the “ Securities Act ”) (together with all certifications required pursuant to the Sarbanes-Oxley Act of 2002 (the “ Sarbanes-Oxley Act ”)) (such documents and any other documents that the Company has filed with or furnished to the SEC, as have been amended, collectively, the “ Company SEC Documents ”). As of their respective filing dates, the Company SEC Documents (i) did not (or with respect to the Company SEC Documents filed after the date of this Agreement, will not) contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading and (ii) complied with the applicable requirements of the Exchange Act or the Securities Act, as the case may be, and the applicable rules and regulations of the SEC thereunder, except where the failure to comply with such requirements, rules or regulations would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. All of the audited financial statements and unaudited interim financial statements of the Company included in the Company SEC Documents (collectively, the “ Financial Statements ”), (A) have been or will be, as the case may be, prepared from, are in accordance with, and accurately reflect the books and records of the Company in all material respects, (B) have been or will be, as the case may be, prepared in accordance with United States generally accepted accounting principles (“ GAAP ”) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto or, in the case of unaudited interim financial statements, for normal and recurring year-end adjustments and as may be permitted by the SEC on Form 10-Q, Form 8-K or any successor or like form under the Exchange Act), and (C) fairly present in all material respects the financial position and the results of operations and cash flows of the Company as of the times and for the periods referred to therein.

 

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(b) The Company has designed and maintains a system of internal controls over financial reporting (as defined in Rules 13a-15 and 15d-15 promulgated under the Exchange Act) sufficient to provide reasonable assurances regarding the reliability of financial reporting. The Company has designed and maintains disclosure controls and procedures (as defined in Rules 13a-15 and 15d-15 promulgated under the Exchange Act) to ensure that material information required to be disclosed by the Company in the Company SEC Documents filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding required disclosure and to make the certifications required pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002. The Company’s management has completed its assessment of the effectiveness of the Company’s internal controls over financial reporting in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act for the year ended December 31, 2007, and such assessment concluded that such controls were effective.

Section 3.8 Absence of Certain Changes.

(a) Except as contemplated by this Agreement and as set forth in Section 3.8 of the Company Disclosure Schedule, since December 31, 2007, the Company has only conducted its business in the ordinary course of business consistent with past practice.

(b) Since December 31, 2007, no facts, changes, events, developments or circumstances have occurred, arisen, come into existence or become known that have had or would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, and neither the Company nor any of the Company Subsidiaries has taken any action or omitted to take any action that if taken or omitted to be taken after the date of this Agreement, would be prohibited by or would constitute a breach of the provisions of Sections 5.1(a)-(q).

Section 3.9 Absence of Undisclosed Liabilities. Except (a) as reflected or otherwise reserved against on the Financial Statements, (b) for liabilities and obligations incurred since December 31, 2007 in the ordinary course of business, (c) for liabilities and obligations incurred under this Agreement or in connection with the Transactions, (d) liabilities and obligations incurred under any Company Agreement other than liabilities or obligations due to breaches thereunder, and (e) for liabilities and obligations that are not, individually or the aggregate, material to the Company, the Company and the Company Subsidiaries are not subject to any liabilities or obligations of any nature, whether or not accrued, contingent or otherwise, and whether or not required by GAAP to be recognized or disclosed on a consolidated balance sheet of the Company and the Company Subsidiaries (or in the notes thereto).

Section 3.10 Litigation. Except as set forth in Section 3.10 of the Company Disclosure Schedule, there is no claim, action, suit, arbitration, investigation, alternative dispute resolution action or any other judicial or administrative proceeding, in law or equity (collectively, a “ Legal Proceeding ”), pending against (or, to the Company’s knowledge, threatened against) the Company or any of the Company Subsidiaries, or to the Company’s knowledge, any executive officer or director of the Company or any of the Company Subsidiaries (in their capacity as such) that would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. Neither the Company nor any of the Company Subsidiaries is a party to or subject to any outstanding order, writ, injunction, decree or arbitration ruling or judgment of a Governmental Entity that has had or would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect or prevent or materially delay the consummation of the Offer, the Merger or any of the other Transactions.

Section 3.11 Employee Benefit Plans; ERISA.

(a) Section 3.11(a) of the Company Disclosure Schedule sets forth a correct and complete list of all pension, profit sharing, retirement, profit sharing, deferred compensation, stock option, change in control, retention, employment, consulting, equity or equity-based compensation, stock purchase, employee stock ownership, severance pay, vacation, bonus or other incentive plans, programs, agreements or arrangements,

 

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all medical, vision, dental or other health plans, all life insurance plans, and all other material employee benefit or fringe benefit plans programs, agreements or arrangements, including each “employee benefit plans” as that term is defined in Section 3(3) of ERISA, in each case, whether oral or written, funded or unfunded, or insured or self-insured, entered into or maintained by the Company or any Company Subsidiary, or to which the Company or any Company Subsidiary contributes or is obligated to contribute thereunder, or with respect to which the Company or any Company Subsidiary has or may have any liability (contingent or otherwise), in each case, for or to any current or former employees, directors or officers of the Company or any Company Subsidiary and/or their dependents (collectively, the “ Benefit Plans ”).

(b) All Benefit Plans that are intended to be qualified under to Code Section 401(a) and any trust agreement that is intended to be tax exempt under Code Section 501(a) have been determined by the Internal Revenue Service to be qualified under Code Section 401(a) and exempt from taxation under Code Section 501(a), or the plan is maintained on a prototype document set and the Company is entitled to rely on an opinion letter issued to the prototype sponsor as to the qualification of the plan, and, to the knowledge of the Company, and no fact, circumstance or event exists or has occurred that would adversely affect the qualification of any such plan unless the failure to be so qualified would not be reasonably expected to have a Company Material Adverse Effect. Except as has not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect:

(A) Each Benefit Plan and any related trust complies with and has been administered in compliance with, (A) the provisions of ERISA, (B) all applicable provisions of the Code, (C) all other applicable laws, and (D) its terms and the terms of any collective bargaining or collective labor agreements;

(B) There are no unresolved claims or disputes under the terms of, or in connection with, the Benefit Plans other than routine claims for benefits which are payable in the ordinary course;

(C) There has not been, and the consummation of the transactions contemplated hereby will not result in, any non-exempt “ prohibited transaction ” (within the meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to any Benefit Plan.

(D) No litigation has been commenced with respect to any Benefit Plan and, to the knowledge of the Company, no such litigation is threatened.

(E) There are no governmental audits, investigations or inquiries pending or, to the knowledge of the Company, threatened in connection with any Benefit Plan. With respect to each Benefit Plan for which financial statements are required, there has been no adverse change in the financial status of such Benefit Plan since the date of the most recent financial statements provided to Parent by the Company. All contributions, premiums and other payments required to be made with respect to any Benefit Plan have been made on or before their due dates under applicable law and the terms of such Benefit Plan, and with respect to any such contributions, premiums or other payments required to be made with respect to any Benefit Plan that are not yet due adequate reserves are reflected on the consolidated balance sheet of Company included in the Annual Report on Form 10-K for the fiscal year ended December 30, 2007 (including any notes thereto) or liability therefor was incurred in the ordinary course of business consistent with past practice since December 30, 2007.

(F) No security interest in any assets of the Company or any ERISA Affiliate has been granted or lien exists under Section 412 of the Code or under ERISA.

(c) Neither the Company nor any ERISA Affiliate of the Company (i) h