AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

 

CONFIDENTIAL

 

AGREEMENT AND PLAN OF MERGER

 

DATED AS OF

 

June 17, 2005

 

BY AND AMONG

 

DASHAMERICA, INC. D/B/A PEARL IZUMI USA, INC.,

 

NAUTILUS, INC.,

 

PI ACQUISITION COMPANY, INC.

 

AND

 

DAI ESCROW HOLDINGS, LLC

TABLE OF CONTENTS

 

 

i

 

ii

 

iii

Exhibits & Schedules

 

 

iv

AGREEMENT AND PLAN OF MERGER

 

AGREEMENT AND PLAN OF MERGER, dated as of June 17, 2005, by and among Nautilus, Inc., a Washington corporation (“ Parent ”), PI Acquisition Company, Inc., a Colorado corporation (“Newco”), DashAmerica, Inc. d/b/a Pearl Izumi USA, Inc., a Colorado corporation (the “ Company ”), and DAI Escrow Holdings, LLC, a Colorado limited liability company (the “Shareholder Representative”).

 

WHEREAS, the respective Boards of Directors of Parent, Newco and the Company have approved the merger of Newco with and into the Company on the terms and subject to the conditions set forth herein; and

 

WHEREAS, in furtherance thereof, the Boards of Directors of each of Parent, Newco and the Company have approved this Agreement and the Merger (as defined below), upon the terms of and subject to the conditions set forth in this Agreement; and

 

WHEREAS, pursuant to the Merger, shares of Common Stock (as defined below) will be converted into the right to receive the Merger Consideration (as defined below), in the manner set forth herein;

 

NOW, THEREFORE, in consideration of the mutual covenants contained herein, and intending to be legally bound, the parties hereto agree as follows:

 

ARTICLE I - CERTAIN DEFINITIONS

 

Section 1.1 Certain Definitions . As used in this Agreement, the following terms have the respective meanings set forth below.

 

“ Actual Adjustment ” has the meaning set forth in Section 2.7(d)(i) of this Agreement.

 

“ Affiliate ” means, with respect to any Person, any other Person who directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. The term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlled” and “controlling” have meanings correlative thereto.

 

“ Agreement ” means this Agreement and Plan of Merger.

 

“ Articles of Incorporation ” means the Company’s Restated Articles of Incorporation With Amendments, filed with the Colorado Secretary of State on September 17, 1998, as amended by Articles of Amendment filed with the Colorado Secretary of State on May 30, 2003.

 

“ Assumed Indebtedness ” means collectively the Licensor/Japan Obligation and the Shore Sportsworks GmbH Obligation.

“ Business Day ” means a day, other than a Saturday or Sunday, on which commercial banks in New York City are open for the general transaction of business.

 

“ Cash and Cash Equivalents ” means the sum of the fair market value (expressed in United States dollars) of all cash and cash equivalents (including marketable securities and short term investments) of the Company and the Subsidiaries (as herein defined) as of immediately prior to the Closing.

 

“ CBCA ” has the meaning set forth in Section 2.1 of this Agreement.

 

“ Certificates ” means the outstanding certificates which immediately prior to the Effective Time represent shares of Common Stock.

 

“ Closing ” and “ Closing Date ” have the meanings set forth in Section 2.12 of this Agreement.

 

“ Closing Date Certificate ” has the meaning set forth in Section 2.7(a) of this Agreement.

 

“ Closing Date Funded Indebtedness ” means the Funded Indebtedness as of immediately prior to the Closing.

 

“ Closing Date Payment ” has the meaning set forth in Section 2.7(a) of this Agreement.

 

“ COBRA ” means requirements of Part 6 of Subtitle B of Title I of ERISA and Section 4980B of the Code and any similar state law.

 

“ Code ” means the Internal Revenue Code of 1986, as amended.

 

“ Common Stock ” means common stock, par value $0.0l per share, of the Company.

 

“ Company Certificate ” has the meaning set forth in Section 2.7(a) of this Agreement.

 

“ Company Intellectual Property Rights ” has the meaning set forth in Section 3.14 of this Agreement.

 

“ Confidentiality Agreement ” has the meaning set forth in Section 5.1(b) of this Agreement.

 

“ Effective Time ” has the meaning set forth in Section 2.2 of this Agreement.

 

“ Employee Benefit Plan ” means each “employee benefit plan” (as such term is defined in Section 3(3) of ERISA) and each other material employee benefit plan, obligation, program, practice or arrangement, whether or not legally enforceable, maintained, sponsored or contributed to by the Company or any of its ERISA Affiliates to provide benefits (other than (i) base salary or hourly wages and (ii) any government sponsored program for which contributions by the Company or any of its ERISA Affiliates are required by law) to present or former directors, employees, or agents, including consulting agreements, vacation pay, severance policies, and fringe benefits.

 

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“ Enterprise Value ” means $74,000,000.00.

 

“ Environmental Laws ” shall mean all federal, state and foreign statutes, regulations, and local ordinances having the force and effect of law concerning pollution or protection of the environment in effect on or prior to the Closing Date.

 

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

 

“ ERISA Affiliate ” means any entity that is considered a single employer with the Company under Section 414 of the Code.

 

“ Escrow Account ” has the meaning set forth in Section 2.7(b)(i) of this Agreement.

 

“ Escrow Agreement ” has the meaning set forth in Section 2.7(b)(i) of this Agreement.

 

“ Estimated Closing Date Payment ” has the meaning set forth in Section 2.7(a) of this Agreement.

 

“ Estimated Purchase Price ” means a good faith estimate of the Purchase Price (as such term is defined in this Section 1.1 ) on the basis of the Company’s most recent financial statements and as determined by the Company’s Vice President of Finance in accordance with the terms of Section 2.7(a) , taking into account the actual (i) Enterprise Value, and (ii) Assumed Indebtedness, and a good faith estimate of the Cash and Cash Equivalents as of the Closing Date.

 

“ Financial Statements ” has the meaning set forth in Section 3.6(a) of this Agreement.

 

“ Funded Indebtedness ” means, as of any date, without duplication, the aggregate outstanding principal amount of, accrued and unpaid interest on and other payment obligations (including any prepayment premiums payable as a result of the consummation of the Merger) arising under any obligations of the Company or any Subsidiary consisting of (i) indebtedness for borrowed money or indebtedness issued in substitution or exchange for borrowed money or for the deferred purchase price of property or services (excluding trade payables and accrued expenses arising in the ordinary course of business), (ii) indebtedness evidenced by any note, bond, debenture or other debt security or (iii) obligations under any interest rate, currency or other hedging agreements, in each case, as of such date, excluding any undrawn letters of credit and undrawn portions of lines of credit and including, without limitation, indebtedness pursuant to (x) the Credit Agreement, dated as of January 5, 2004, between the Company and Wells Fargo Bank, National Association, as amended, restated or modified from time to time, (y) the Promissory Note, dated January 9, 1997, issued by the Company to Pearl Izumi, Inc., a Japanese corporation (“ Licensor/Japan ”), pursuant to the Second Amended and Restated Technology and Trademark License Agreement, dated as of October 21, 1996, between Licensor/Japan and the Company, as amended, restated or modified from time to time and (z) the Promissory Note, dated February 22, 2005, issued by the Company to Licensor/Japan, pursuant to the Purchase Agreement, dated as of February 22, 2005, between Licensor/Japan and the Company, as the same may be amended, restated or modified from time to time. Notwithstanding the foregoing, “Funded Indebtedness” shall not include any obligations under operating leases or capitalized leases.

 

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“ GAAP ” means generally accepted accounting principles as in effect in the United States on the date of this Agreement, applied on a consistent basis.

 

“ Governmental Authority ” means any national, federal, state, provincial, county, municipal or local government, foreign or domestic, or the government of any political subdivision of any of the foregoing, or any entity, authority, agency, ministry or other similar body exercising executive, legislative, judicial, regulatory or administrative authority or functions of or pertaining to government, including any authority or other quasi-governmental entity established to perform any of such functions.

 

“ Hazardous Substances ” means (a) any petrochemical or petroleum products, radioactive materials, asbestos, urea formaldehyde foam insulation, transformers or other equipment that contain dielectric fluid containing polychlorinated biphenyls, and radon gas; (b) any chemicals, materials or substances defined as or included in the definition of “hazardous substances,” “hazardous wastes,” “hazardous materials,” “restricted hazardous materials,” “extremely hazardous substances,” “toxic substances,” “contaminants” or “pollutants” or words of similar meaning and regulatory effect; or (c) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any applicable Environmental Law.

 

“ HSR Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.

 

“ Intellectual Property Rights ” means all patents, patent applications and industrial designs (including without limitation any continuations, divisionals, continuations-in-part, renewals and reissues), trademarks, service marks, trade names, designs, logos, slogans, other similar designations of source or origin and general intangibles of like nature, together with the goodwill of the business symbolized by any of the foregoing, and all registrations and applications therefor, copyrights, copyright registrations and applications, domain names, trade secrets, know-how and other confidential information, software and databases.

 

“ Knowledge ” as used with respect to the Company (including references to the Company being aware of a particular matter) shall mean those facts that are known or should reasonably have been known after due inquiry by the Company’s President, Vice President of Finance and Vice President/Chief of Staff.

 

“ Licensor/Japan Obligation ” means the net present value of the aggregate portion of the Funded Indebtedness resulting from (i) the Promissory Note, dated January 9, 1997, issued by the Company to Licensor/Japan, pursuant to the Second Amended and Restated Technology and Trademark License Agreement, dated as of October 21, 1996, between Licensor/Japan and the Company, as amended, restated or modified from time to time and (ii) the Promissory Note, dated February 22, 2005, issued by the Company to Licensor/Japan, pursuant to the Purchase Agreement, dated as of February 22, 2005, between Licensor/Japan and the Company, as the same may be amended, restated or modified from time to time, which the parties hereto agree and acknowledge shall be $5,259,000 as of the Closing Date, or $5,409,000 as of the Closing Date if the Company fails to make the scheduled June 2005 payment under such obligation of approximately $150,000 prior to the Closing Date.

 

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“ Lien ” means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind but, for the avoidance of doubt, shall not include license agreements.

 

“ Material Adverse Effect ” means a material adverse effect upon the financial condition, business, or results of operations of the Company and its Subsidiaries, taken as a whole; provided , that any adverse change, event or effect arising from or related to: (i) conditions affecting the retail industry generally or the United States economy generally; (ii) national or international political or social conditions, including the engagement by the United States in hostilities; (iii) financial, banking or securities markets (including any disruption thereof and any decline in the price of any security or any market index); (iv) changes in GAAP; (v) changes in any laws, rules, regulations, orders, or other binding directives issued by any Governmental Authority; (vi) any action taken by a party hereto in accordance with this Agreement; (vii) any adverse change in or effect on the business of the Company that is cured by the Company prior to the Closing; (viii) the public announcement of the transactions contemplated by this Agreement; or (ix) the completion of the transactions contemplated hereby, shall not be taken into account in determining whether a “Material Adverse Effect” has occurred or would reasonably be expected to occur with respect to such entity.

 

“ Merger Consideration ” means, with respect to each outstanding share of Common Stock, an amount equal to (i) the Closing Date Payment plus (ii) if and when payable, a Pro Rata Portion of (A) amounts payable, directly or indirectly, to the Shareholders pursuant to Section 2.7(d) and Section 9.1(b) hereof and (B) amounts payable, directly or indirectly, to the Shareholders from the Escrow Account pursuant to the terms hereof and the Escrow Agreement.

 

“ Merger Documents ” means, collectively, this Agreement, the Statement of Merger, the Escrow Agreement, and all other agreements and documents entered into in connection with the Merger and the other transactions contemplated hereby.

 

“ Most Recent Balance Sheet Date ” and “ Most Recent Unaudited Financial Statements ” have the meanings set forth in Section 3.6(a)(ii) of this Agreement.

 

“ Multiemployer Plan ” has the meaning set forth in Section 3(37) of ERISA.

 

“ Net Working Capital ” means, as of any date:

 

(i)(A) accounts receivable (net of reserves for doubtful accounts) plus (B) inventory plus (C) prepaid expenses and other current assets

 

minus

 

(ii)(A) accounts payable plus (B) accrued expenses and other current liabilities,

 

of the Company and the Subsidiaries, on a consolidated basis, as of such date, as determined in accordance with GAAP (subject to Section 3.6(b) of this Agreement) and without giving effect to the transactions contemplated by this Agreement. Notwithstanding the foregoing, “Net Working Capital” shall not include any Cash and Cash Equivalents, deferred income taxes, property and equipment, trademarks, goodwill and other intangible assets, Funded Indebtedness, Seller Expenses, and any fees, expenses or other liabilities incurred in connection with any financing by Parent, Newco and their respective Affiliates of the transactions contemplated hereby.

 

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“ Option Agreements ” means the option agreements entered into by and between the Company and certain Persons described in Schedule 3.5(a) as holders of Stock Options, each as amended, restated or modified from time to time.

 

“ Option Plans ” means the Company’s 1992 Stock Option Plan and 2002 Stock Option Plan, as amended, restated or modified from time to time.

 

“ Permitted Liens ” means such of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding shall have been commenced: (i) Liens for Taxes, assessments and governmental charges or levies not yet due and payable as of the Effective Time; (ii) Liens imposed by law, such as materialmen’s, mechanics’, carriers’, workmen’s and repairmen’s Liens and other similar Liens arising in the ordinary course of business securing obligations that (A) are not due and payable and (B) are not in excess of $50,000 in the aggregate at any time; (iii) pledges or deposits to secure obligations under workers’ compensation laws or similar legislation or to secure public or statutory obligations; and (iv) reciprocal easement agreements and other customary encumbrances on title to the Leased Property that (A) were not incurred in connection with any indebtedness, (B) do not render title to the property encumbered thereby unmarketable and (C) do not, individually or in the aggregate, materially adversely affect the use or occupancy of such property.

 

“ Person ” means an individual, partnership, corporation, limited liability company, joint stock company, unincorporated organization or association, trust, joint venture, association or other organization, whether or not a legal entity, or a Governmental Authority.

 

“ Pro Rata Portion ” means, with respect to any payment to the Shareholders pursuant to Section 2.7(d) or directly or indirectly from the Escrow Account (or as set forth in Section 9.1(b) ), that portion of such payment as equals with respect to each share of Common Stock outstanding immediately prior to the Effective Time (including any shares of Common Stock issued upon the exercise of Stock Options as contemplated by Section 2.11 ), (i) the amount of such payment divided by (ii) the sum of the number of shares of Common Stock outstanding immediately prior to the Effective Time.

 

“ Purchase Price ” means (i) the Enterprise Value, plus (ii) the Cash and Cash Equivalents, minus (iii) the Assumed Indebtedness.

 

“ Seller Expenses ” means (i) the following expenses incurred by or on behalf of the Company in connection with the consummation of the transactions contemplated hereby, which shall be paid at the Closing in accordance with Section 2.7(a) to the extent not paid by the Company prior to the Closing: (A) fees and expenses payable to Wachovia Capital Markets, LLC pursuant to its engagement letter with the Board of Directors of the Company, dated October 8, 2004, and (B) fees and expenses payable to (x) Womble Carlyle Sandridge & Rice, PLLC, counsel to the Board of Directors of the Company, (y) Grimshaw & Harring, P.C., counsel to the Company, and (z) any other legal, accounting or professional fees and expenses of the Company or the Board of Directors of the Company, in each case as of the Closing, plus (ii)

 

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$250,000 to be retained by the Shareholder Representative as an expense reserve, as provided in Section 9.1(b) hereof; provided , that in no event shall Seller Expenses include any expenses incurred by any legal counsel, accountants, investment bankers, or consultants hired by Parent, Newco or any of their respective Affiliates or any expenses incurred in connection with the financing of the transactions contemplated hereby.

 

“ Shareholder Approval ” shall mean the approval of this Agreement by the holders of the requisite shares of Common Stock, obtained at a duly called meeting of the Shareholders in accordance with Section 7-107-105 of the CBCA.

 

“ Shareholder Representative ” means, initially, DAI Escrow Holdings, LLC, a Colorado limited liability company, and/or, if applicable, any successor to DAI Escrow Holdings, LLC appointed to such representative capacity pursuant to Section 9.1(f) .

 

“ Shareholders ” mean the holders of Common Stock.

 

“ Shore Sportsworks GmbH Obligation ” means the net present value of the projected aggregate obligation of the Company remaining under the Asset Purchase Agreement dated as of January 1, 2004 among the Company, Pearl Izumi GmbH and the sellers named therein, which the parties hereto agree shall be $124,496 as of the Closing Date.

 

“ Stock Options ” means the options to purchase up to 1,683,520 shares of Common Stock outstanding as of the date hereof issued to certain current employees and directors of the Company pursuant to the Option Plans or otherwise and pursuant to certain Option Agreements.

 

“ Subsidiary ” means, with respect to any Person, any corporation, partnership, association or other business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a partnership, association or other business entity, a majority of the partnership or other similar ownership interests thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a partnership, association or other business entity if such Person or Persons shall be allocated a majority of partnership, association or other business entity gains or losses or shall be or control the managing director, managing member, general partner or other managing Person of such partnership, association or other business entity. Unless the context requires otherwise, each reference to a Subsidiary shall be deemed to be a reference to a Subsidiary of the Company.

 

“ Surviving Corporation ” has the meaning set forth in Section 2.1 of this Agreement.

 

“ Tax ” means any federal, state, local or foreign income, gross receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use, transfer, real property gains, registration, value added, excise, natural resources, severance, stamp, occupation, windfall profits, environmental (under Section 59A of the Code), customs, duties, real property, personal property, capital stock, social security (or similar), unemployment, disability, payroll, license, employee or other withholding, or other tax, of any kind whatsoever, including any interest, penalties or additions to tax or similar items in respect of the foregoing (whether disputed or not).

 

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“ Tax Return ” means any return, report, declaration, claim for refund, information return or other document (including any related or supporting schedule, statement or information) filed or required to be filed in connection with the determination, assessment or collection of any Tax of any party or the administration of any laws, regulations or administrative requirements relating to any Tax (including any amendment thereof).

 

“ Threshold Amount ” means $350,000.

 

Section 1.2 Interpretation. Unless otherwise indicated to the contrary herein by the context or use thereof: (i) the words, “herein,” “hereto,” “hereof” and words of similar import refer to this Agreement as a whole and not to any particular Section or paragraph hereof; (ii) the word “including” means “including, but not limited to”; (iii) masculine gender shall also include the feminine and neutral genders, and vice versa; and (iv) words importing the singular shall also include the plural, and vice versa.

 

ARTICLE II - THE MERGER

 

Section 2.1 The Merger. Upon the terms and subject to the conditions of this Agreement, at the Effective Time, Newco shall, pursuant to the provisions of the Colorado Business Corporation Act (as amended from time to time, the “ CBCA ”), be merged with and into the Company (the “ Merger ”), and the separate corporate existence of Newco shall thereupon cease in accordance with the provisions of the CBCA. The Company shall be the surviving corporation in the Merger and shall continue to exist as the surviving corporation under its present name pursuant to the provisions of the CBCA. The separate corporate existence of the Company with all its rights, privileges, powers and franchises shall continue unaffected by the Merger. The Merger shall have the effects specified in the CBCA. From and after the Effective Time, the Company is sometimes referred to herein as the “ Surviving Corporation .”

 

Section 2.2 Statement of Merger. On the Closing Date, the parties hereto shall cause a statement of merger substantially in the form attached hereto as Exhibit A (the “ Statement of Merger ”), in accordance with the relevant provisions of the CBCA, to be properly executed and filed in accordance with the CBCA and shall make all other filings or recordings required under the CBCA. The Merger shall be effective at the time and on the date of the filing of the Statement of Merger in accordance with the CBCA, which filing shall occur on the Closing Date (the “ Effective Time ”).

 

Section 2.3 Articles of Incorporation. The articles of incorporation of the Surviving Corporation shall be amended and restated at and as of the Effective Time to read as did the articles of incorporation of Newco immediately prior to the Effective Time (except that the name of the Surviving Corporation will remain unchanged). Such amended and restated articles of incorporation of the Surviving Corporation shall continue in full force and effect until further amended in the manner prescribed by the provisions of the CBCA.

 

Section 2.4 Bylaws. The bylaws of Newco, substantially in the form previously provided to the Company (but otherwise in form and substance satisfactory to Newco) in effect immediately prior to the Effective Time shall be the bylaws of the Surviving Corporation until amended in accordance with applicable law.

 

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Section 2.5 Officers. The officers of the Company immediately prior to the Effective Time shall be the officers of the Surviving Corporation and will hold office until their successors are duly elected or appointed and qualify in the manner provided in the articles of incorporation or bylaws of the Surviving Corporation or as otherwise provided by law, or until their earlier death, resignation or removal.

 

Section 2.6 Directors. The directors of Newco immediately prior to the Effective Time shall be the directors of the Surviving Corporation and will serve until their successors are duly elected or appointed and qualify in the manner provided in the articles of incorporation or bylaws of the Surviving Corporation or as otherwise provided by law, or until their earlier death, resignation or removal.

 

Section 2.7 Purchase Price.

 

(a) Estimated Purchase Price . No later than two Business Days following the satisfaction or waiver of all conditions required by Article VI of this Agreement (other than those conditions that by their terms cannot be satisfied until Closing) (the “ Company Certificate Date ”), the Company shall deliver to Parent and the Shareholder Representative a certificate (the “ Company Certificate ”) setting forth the calculation of the Estimated Purchase Price. The calculation of the Estimated Purchase Price shall be executed by the Company’s Vice President of Finance and shall be determined based upon the Company’s most recent financial statements as of the date of such estimate, taking into account changes in the Company’s financial position since the date of such financial statements. The Company Certificate shall also set forth (i) the estimated amount per share that the holder of each share of Common Stock (including shares of Common Stock expected to be issued upon exercise of Stock Options as contemplated by Section 2.11(d)) shall be paid at Closing (subject to the terms hereof) based upon the calculation of the Estimated Purchase Price (the “Estimated Closing Date Payment”), and the number of shares of Common Stock estimated to be outstanding immediately prior to the Closing (including shares of Common Stock expected to be issued upon exercise of Stock Options as contemplated by Section 2.11(d) ), (ii) the estimated amount of all Seller Expenses as of the Closing Date or otherwise incurred in connection with the transactions contemplated hereby, together with an itemized list of each such Seller Expense and the applicable creditor relating to such Seller Expense, (iii) the actual amount of all Closing Date Funded Indebtedness, together with an itemized list of each portion of such Funded Indebtedness and the applicable creditor relating to such portion of such Funded Indebtedness and (iv) the amount of cash to be distributed to the Shareholders after the date of the Company Certificate and prior to Closing. The Company Certificate shall be substantially in the form set forth on Exhibit B (provided that such sample Company Certificate is merely illustrative of the information and calculations set forth therein, and does not necessarily reflect the actual financial figures to be used in completing such calculations in the Closing Date Certificate, except as otherwise set forth in this Agreement). The Company shall deliver to Parent, upon its reasonable request, any information and documentation relied upon by the Company in completing the Company Certificate.

 

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As promptly as practicable but not later than three Business Days after the Company Certificate Date, each of the Shareholder Representative and Parent shall identify any adjustments to the Company Certificate that it reasonably believes are required to accurately set forth the Estimated Purchase Price and the Estimated Closing Date Payment or shall confirm in writing to the Company that no such adjustments are necessary. If the Company, Parent or the Shareholder Representative disputes any such adjustments, they shall all use their reasonable best efforts to resolve such dispute. No later than the next Business Day after the day upon which the parties resolve such dispute, or, in the absence of a dispute on the fourth Business Day after the Company Certificate Date, the Company shall re-deliver to Parent and the Shareholder Representative a certificate (the “ Closing Date Certificate ”) setting forth the calculation of the Estimated Purchase Price and the Estimated Closing Date Payment (with such adjustments as the parties have agreed are appropriate, if applicable), and the actual Seller Expenses and Closing Date Funded Indebtedness. The Estimated Closing Date Payment as set forth in the Closing Date Certificate is referred to in this Agreement as the “ Closing Date Payment .”

 

(b) Closing Date Payments .

 

(i) On the Closing Date, contemporaneously with the filing of the Statement of Merger, Parent shall, or shall cause Newco or the Surviving Corporation to:

 

(A) Deposit $3,500,000 of cash (such amount, the “ Escrow Amount ” and such cash, the “ Escrow Fund ”) into an escrow account (the “ Escrow Account ”), pursuant to an escrow agreement (the “ Escrow Agreement ”) to be entered into on the Closing Date among the Surviving Corporation, the Shareholder Representative and an escrow agent to be mutually agreed upon between Newco and the Shareholder Representative (the “Escrow Agent”), substantially in the form of Exhibit C attached hereto (which amount may be increased or decreased by one hundred percent of the earnings and interest, or fifty percent of the costs and fees, associated with the Escrow Fund and Escrow Account, as more specifically provided in the Escrow Agreement); and

 

(B) Pay the Shareholder Representative an amount equal to the difference between (i) the Estimated Purchase Price and (ii) the Escrow Amount.

 

(ii) On the Closing Date, promptly after receipt of the funds contemplated by Section 2.7(b)(i)(B) , the Shareholder Representative shall:

 

(A) Pay or cause to be paid the Seller Expenses (to the extent not paid by the Company prior to the Closing);

 

(B) Pay or cause to be paid the applicable portion of the Closing Date Funded Indebtedness to each of the Persons owed a portion of such Funded Indebtedness, with the exception of the Assumed Indebtedness, which shall remain a liability of the Surviving Corporation from and after Closing; and

 

(C) With respect to each share of Common Stock outstanding immediately prior to the Closing, pay to each holder thereof an amount per share equal to the Closing Date Payment in accordance with the terms of the Closing Date Certificate and Sections 2.8 and 2.9 .

 

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(c) Calculation of the Post-Closing Adjusted Purchase Price .

 

(i) As soon as practicable, but no later than 90 days after the Closing Date, Parent and the Surviving Corporation shall prepare and deliver to the Shareholder Representative a proposed calculation of the post-Closing adjusted Purchase Price (the “ Proposed Purchase Price ”), taking into account the Enterprise Value, the Assumed Indebtedness, and, as of immediately prior to the Closing, the Cash and Cash Equivalents (the “ Proposed Closing Date Cash and Cash Equivalents ”), and the components thereof. Such calculations shall collectively be referred to herein from time to time as the “ Proposed Closing Date Calculations .”

 

(ii) If the Shareholder Representative does not give written notice of dispute (a “ Purchase Price Dispute Notice ”) to Parent within 30 days after receiving the Proposed Closing Date Calculations, the Shareholder Representative and the other parties hereto agree that (A) the Proposed Closing Date Cash and Cash Equivalents shall be deemed to be the Cash and Cash Equivalents as of immediately prior to the Closing, and (B) the Proposed Purchase Price shall be deemed to be the Purchase Price. If Parent gives a Purchase Price Dispute Notice to the Shareholder Representative (which Purchase Price Dispute Notice must set forth, in reasonable detail, the items and amounts in dispute) within such 30-day period, Parent and the Shareholder Representative will use reasonable efforts to resolve the dispute during the 30-day period commencing on the date the Shareholder Representative receives the applicable Purchase Price Dispute Notice from Parent.

 

(iii) If the Shareholder Representative and Parent do not obtain a final resolution within such 30-day period, then the items in dispute shall be submitted immediately to a nationally-recognized accounting firm mutually agreed to by the parties (the “ Accounting Firm ”) which shall be independent; provided , that if such firm is not independent, Parent and the Shareholder Representative shall cooperate to designate another independent accountant to serve as the Accounting Firm. Each party agrees to execute, if required by the Accounting Firm, an engagement letter with the Accounting Firm containing reasonable and customary terms. The Accounting Firm shall determine only those issues still in dispute at the time of submission to the Accounting Firm, and the Accounting Firm’s determination shall be based upon and consistent with the terms and conditions of this Agreement. The determination by the Accounting Firm shall be based on presentations with respect to such disputed items by Parent and the Shareholder Representative to the Accounting Firm and, if determined necessary by the Accounting Firm, on the Accounting Firm’s independent review. Each of Parent and the Shareholder Representative shall use its reasonable best efforts to make its presentation as promptly as practicable following submission to the Accounting Firm of the disputed items, and each such party shall be entitled, as part of its presentation, to respond to the presentation of the other party and any questions and requests of the Accounting Firm. In deciding any matter, the Accounting Firm (i) shall be bound by the provisions of this Section 2.7(c) and (ii) may not assign a value to any item greater than the greatest value for such item

 

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claimed by either Parent or the Shareholder Representative or less than the smallest value for such item claimed by Parent or the Shareholder Representative. The Accounting Firm’s determination shall be made within 30 days after its engagement, shall be set forth in a written statement delivered to Parent and the Shareholder Representative and shall be final, conclusive, non-appealable and binding for all purposes hereunder; provided , that such determination may be reviewed, corrected or set aside by a court of competent jurisdiction but only upon a finding that the Accounting Firm committed manifest error with respect to its determination. The determination of the Accounting Firm shall not be deemed an award subject to review under the Federal Arbitration Act or any other statute. The Accounting Firm will revise the Proposed Closing Date Calculations as appropriate to reflect the resolution of any objections thereto pursuant to this Section 2.7(c) . The Proposed Purchase Price together with any revisions thereto pursuant to this Section 2.7(c) shall be deemed the actual Purchase Price for purposes hereof.

 

(iv) In the event the Shareholder Representative and Parent submit any unresolved objections to an Accounting Firm for resolution as provided in this Section 2.7(c) , the responsibility for the fees and expenses of the Accounting Firm shall be as follows:

 

(A) if such Accounting Firm resolves all of the remaining objections in favor of Parent’s position (the Purchase Price so determined is referred to herein as the “ Low Value ”), then all of the fees and expenses of the Accounting Firm shall be paid from the Escrow Fund;

 

(B) if the Accounting Firm resolves all of the remaining objections in favor of the Shareholder Representative’s position (the Purchase Price so determined is referred to herein as the “ High Value ”), then Parent will be responsible for all of the fees and expenses of the Accounting Firm; and

 

(C) if such Accounting Firm neither resolves all of the remaining objections in favor of Parent’s position nor resolves all of the remaining objections in favor of the Shareholder Representative’s position (the Purchase Price so determined is referred to herein as the “ Actual Value ”), then that fraction of the fees and expenses of the Accounting Firm equal to (x) the difference between the High Value and the Actual Value over (y) the difference between the High Value and the Low Value shall be paid from the Escrow Fund, and Parent will be responsible for the remainder of the fees and expenses of the Accounting Firm.

 

(v) Parent will make the financial records of the Surviving Corporation and its Subsidiaries available to the Shareholder Representative, its accountants, the Accounting Firm and other representatives of the Shareholder Representative and the Accounting Firm at reasonable times upon reasonable notice at any time before and after the delivery of the Proposed Closing Date Calculations and continuing during the resolution of any objections with respect to the Proposed Closing Date Calculations.

 

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(d) Adjustment to Estimated Purchase Price .

 

(i) If the difference between (A) the Purchase Price determined in accordance with Section 2.7(c) , minus (B) the Estimated Purchase Price as set forth in the Closing Date Certificate (the “ Actual Adjustment ”) is a positive amount, then within three Business Days after the date on which the Purchase Price is finally determined pursuant to Section 2.7(c) above, the Surviving Corporation will pay to the Shareholder Representative, on behalf of each holder of Common Stock as of immediately prior to the Closing, such positive amount, without interest, and the Shareholder Representative shall disburse such proceeds to the holders of Common Stock promptly after receipt of such proceeds in accordance with the applicable Pro Rata Portion.

 

(ii) If the Actual Adjustment is a negative amount, then within three Business Days after the date on which the Purchase Price is finally determined pursuant to Section 2.7(c) above, Parent and the Shareholder Representative shall deliver joint written instructions to the Escrow Agent instructing the Escrow Agent to deliver to the Surviving Corporation from the Escrow Fund an amount equal to the absolute value of such negative amount, without interest.

 

Section 2.8 Conversion of Shares.

 

(a) Conversion of Common Stock . As of the Effective Time, by virtue of the Merger and without any action on the part of any holder thereof or any party hereto, each share of Common Stock issued and outstanding immediately prior to the Effective Time (except as provided in Section 2.10 and other than shares held in the Company’s treasury or by any of the Subsidiaries) shall be canceled and converted into the right to receive the Closing Date Payment and, if and when payable in accordance with Section 2.7(d) , Section 9.1(b) and the Escrow Agreement, the balance of the Merger Consideration, payable in cash to the holder thereof without interest thereon, upon surrender of the Certificate formerly representing such share, all in accordance with the Closing Date Certificate and Section 2.7 and Section 2.9 .

 

(b) Newco Shares . As of the Effective Time, each share of capital stock of Newco issued and outstanding immediately prior to the Effective Time shall, without any action on the part of Newco, be converted on a one-for-one basis into shares of the corresponding class of capital stock of the Surviving Corporation.

 

(c) Holders of Certificates . From and after the Effective Time, the holders of Certificates shall cease to have any rights with respect to such Certificates, except the right to receive the Merger Consideration with respect to each of the shares represented thereby.

 

Section 2.9 Exchange of Certificates.

 

(a) Upon surrender of any Certificates, together with duly executed letters of transmittal (which shall be made available by the Company to all holders of Common Stock), on or prior to the Closing Date to the Company or the Shareholder Representative, the holder of each Certificate shall receive from the Shareholder Representative on the Closing Date for each share of Common Stock evidenced thereby, the Closing Date Payment, in the form of cash by wire transfer of immediately available funds, to which such holder is entitled pursuant to the Closing Date Certificate and Section 2.7 and/or Section 2.8 , without interest. At any time after

 

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the Effective Time, upon surrender to the Shareholder Representative of any Certificates (other than Certificates surrendered pursuant to the first sentence of this Section 2.9(a) ), together with such duly executed letter of transmittal, the holder of each such Certificate shall receive from the Shareholder Representative immediately thereafter, the Closing Date Payment, payable in cash pursuant to the Closing Date Certificate and Section 2.7 and/or Section 2.8 , in the form of cash by wire transfer of immediately available funds, to which such holder is entitled pursuant to such sections of the Agreement, without interest; provided , that any such payments for less than $20,000 to a particular holder may be made by check. Each Certificate surrendered pursuant to this Section 2.9(a) shall be promptly delivered to the Surviving Corporation and canceled. The balance of the Merger Consideration (after payment of the Closing Date Payment), if and when payable in accordance with Section 2.7(d) , Section 9.1(b) and the Escrow Agreement, shall be paid in accordance with the holders’ instructions set forth in the letters of transmittal. Holders of Certificates shall not be entitled to receive payment hereunder until such holder’s applicable Certificates have been surrendered pursuant to this Section 2.9 and after the Effective Time. If payment or delivery is to be made to a Person other than the Person in whose name a Certificate so surrendered is registered, it shall be a condition of payment that the Certificate so surrendered shall be properly endorsed or otherwise in proper form for transfer, that the signatures on the certificate or any related stock power shall be properly guaranteed and that the Person requesting such payment either pay any transfer or other Taxes required by reason of the payment to a Person other than the registered holder of the Certificate so surrendered or establish to the satisfaction of the Surviving Corporation that such Tax has been paid or is not applicable. Until surrendered in accordance with the provisions of this Section 2.9 , each Certificate shall represent for all purposes only the right to receive the Merger Consideration in the form provided for by this Agreement, without interest. All cash paid upon surrender of the Certificates in accordance with this Section 2.9 and other consideration provided for in this Article II and Section 9.1(b) shall be deemed to have been paid in satisfaction of all rights pertaining to the shares of Common Stock represented thereby.

 

(b) In the event that any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the registered holder of such lost, stolen or destroyed Certificate in form and substance acceptable to Parent and the Shareholder Representative, the Shareholder Representative will deliver in exchange for such lost, stolen or destroyed Certificate the Merger Consideration in respect thereof in the manner set forth in Section 2.7 and/or Section 2.8 . Thereafter, the Shareholder Representative will promptly deliver such affidavit to the Surviving Corporation.

 

(c) If Certificates are not surrendered prior to the date that is three years after the Effective Time (or such earlier date to the extent that any cash payable to the holder of such Certificate would otherwise escheat to or become the property of any Governmental Authority), unclaimed amounts (including interest thereon) of Merger Consideration shall, to the extent permitted by applicable law, become the property of the Surviving Corporation and may be commingled with the general funds of the Surviving Corporation, free and clear of all claims or interest, and any shareholders of the Company who have not theretofore complied with the provisions of this Section 2.9 shall thereafter look only to the Surviving Corporation and only as general creditors thereof for payment for their claims in the form and amounts to which such shareholders are entitled.

 

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(d) After the Effective Time, there shall be no transfers on the stock transfer books of the Surviving Corporation of the shares of Common Stock that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation, they shall be canceled and exchanged for the Merger Consideration, as applicable, as provided for, and in accordance with, the provisions of this Section 2.9 .

 

(e) Notwithstanding anything contained in this Section 2.9 to the contrary, upon termination of the Escrow Account in accordance with the terms of the Escrow Agreement, the Shareholder Representative shall pay over to the Surviving Corporation any funds reserved or set aside by the Shareholder Representative for payment to the Shareholders under this Section 2.9 , at which time the Shareholder Representative shall be relieved of all of its obligations under this Section 2.9 and the Surviving Corporation shall assume all such obligations of the Shareholder Representative under this Section 2.9 , except for those obligations of the Shareholder Representative which it failed to perform under this Section 2.9 prior to the termination of the Escrow Account in accordance with the terms of the Escrow Agreement.

 

Section 2.10 Dissenting Shares. Each share of Common Stock issued and outstanding immediately prior to the Effective Time held by shareholders who shall have properly exercised their dissenters’ rights with respect thereto under Article 113 of the CBCA (such shares of capital stock, collectively, the “ Dissenting Shares ”) shall be canceled as of the Effective Time. Notwithstanding Section 2.7 , Section 2.8 and Section 2.9 hereof, each Dissenting Share shall not be converted into the right to receive the Merger Consideration pursuant to the Merger, but in lieu thereof, the holders of such Dissenting Shares shall be entitled to receive payment of the fair value of such shares in accordance with the provisions of Article 113 of the CBCA; provided , that each Dissenting Share held by a shareholder who (i) shall thereafter withdraw his or her demand for payment of fair value with the consent of the Company or (ii) shall fail to perfect his or her right to such payment as provided in such Article 113, shall be deemed to be converted as of the Effective Time into the right to receive the Merger Consideration, in the form such holder otherwise would have been entitled to receive as a result of the Merger.

 

The Company shall give Parent and the Shareholder Representative prompt notice of any demands received by the Company under Article 113 of the CBCA. 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 settle or offer to settle or otherwise negotiate, any such demands, in each case, unless required by applicable law. The applicable Merger Consideration otherwise payable in consideration of Dissenting Shares shall be reserved by the Shareholder Representative for settlement of any such fair value payments hereunder with respect to the Dissenting Shares, shall not be paid to holders of Dissenting Shares or any other Person except as directed by Parent, and shall be paid by the Shareholder Representative to holders of Dissenting Shares promptly upon written request by Parent. Notwithstanding the foregoing, upon termination of the Escrow Account in accordance with the terms of the Escrow Agreement, the Shareholder Representative shall pay over to the Surviving Corporation any funds reserved or set aside by the Shareholder Representative for settlement of any fair value payment with respect to the Dissenting Shares, at which time the Surviving Corporation shall assume all obligations to maintain and distribute such reserved funds.

 

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Section 2.11 Stock Options.

 

(a) As provided in Section 11 of each of the Option Plans, all outstanding unvested Stock Options shall vest immediately prior to the Effective Time. The Company shall, as soon as practicable after the date of this Agreement, give notice to all holders of Stock Options of such acceleration of vesting, the termination of any unexercised Stock Options as of the Effective Time, its reasonable projection of the Estimated Closing Date Payment to be set forth in the Company Certificate, and its reasonable projection of the anticipated Closing Date. All holders of vested Stock Options who want to participate as Shareholders in the Merger and receive the Merger Consideration must deliver a notice of exercise (a “ Notice of Exercise ”) to the Company no later than five days prior to the anticipated Closing Date set forth in the notice to be sent by the Company as described above. The exercise price of the Stock Options shall be paid by certified check accompanying the Notice of Exercise. Notwithstanding the foregoing sentence, the Company may, in its sole discretion and taking into account the spread between the projected Estimated Closing Date Payment and the exercise prices of the Stock Options, permit some or all of the holders of Stock Options to elect in the Notice of Exercise to exercise such Stock Options by means of a cashless exercise method authorized by the Option Plan. For Persons electing cashless exercise in lieu of paying the exercise price by delivering a certified check as set forth above, the Notice of Exercise shall explicitly authorize the Company to set off against the Closing Date Payment to be received by such Cashless Exerciser an amount equal to the aggregate unpaid exercise price for any exercised Stock Options.

 

(b) The Option Plans shall terminate as of the Effective Time, and no holder of Stock Options issued pursuant to the Option Plans or any participant in the Option Plans shall have any rights thereunder to acquire any equity securities of the Company, Parent, the Surviving Corporation or any Subsidiary. Holders of Stock Options issued pursuant to the Option Plans and vested as of the Effective Time who have not exercised their Stock Options in compliance with Sections 2.11(a) and (b) shall have no rights with respect to such Stock Options or under the Option Plans.

 

(c) Holders of Stock Options who have exercised such options in accordance with this Section 2.11 shall be Shareholders of the Company as of the Effective Time and shall participate in the Merger and the transactions contemplated by this Agreement as Shareholders. However, the accelerated vesting of the outstanding Stock Options and each Notice of Exercise shall be contingent upon the Closing. In the event that the Closing shall not occur, the accelerated vesting shall be deemed to never have occurred and each Notice of Exercise shall be cancelled and deemed to have no effect.

 

(d) Prior to the Closing, the Company shall take the actions necessary to give effect to the provisions of this Section 2.11 , including without limitation actions necessary to comply with the terms of the Option Plan.

 

(e) Notwithstanding anything else in this Agreement to the contrary, the Surviving Corporation shall have the obligation to pay any tax owed by the Company pursuant to the Federal Insurance Contributions Act, as amended, with respect to the exercise of Stock Options by the holders of such Stock Options in accordance with this Section 2.11 of this Agreement, and the non-payment or failure to accrue such payroll tax obligations by the Company shall not constitute a breach of any representation, warranty or covenant by the Company contained in this Agreement.

 

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Section 2.12 Closing . The closing of the transactions contemplated hereby (the “ Closing ”) shall take place at the offices of Garvey Schubert Barer, Seattle, Washington, at 10:00 A.M. Pacific Time on the Business Day following the satisfaction or waiver of the conditions set forth in Article VI (other than those conditions that by their terms cannot be satisfied until the Closing) and (ii) the delivery of the Closing Date Certificate in accordance with the terms of Section 2.7(a) of this Agreement, or on such date and time as the Company and Parent shall mutually agree. The time and date of the Closing is herein called the “ Closing Date .”

 

For clarification purposes, any calculations made pursuant to this Agreement with reference to the Closing Date, the Closing, or immediately prior to the Closing or the Closing Date, shall be deemed to be in reference to the close of business on the Business Day immediately preceding the Closing Date. By way of example, cash credited to the account of the Company on the Business Day prior to the Closing Date shall be considered Cash and Cash Equivalents for purposes hereof, but cash credited to the account of the Company or the Surviving Corporation at any time on the Closing Date (whether before or after the Effective Time) shall be deemed the property of the Surviving Corporation upon Closing.

 

Notwithstanding the foregoing sentence, any cash received or deemed to be received by the Company on the Closing Date in connection with the exercise of Stock Options in accordance with Section 2.11 of this Agreement shall be deemed to be Cash and Cash Equivalents for purposes hereof, and shall be available for distribution to the Shareholders in accordance with Section 5.2(e) hereof; provided , however, that any cash deemed to be received by the Company on or prior to the Closing Date in connection with the cashless exercise of Stock Options in accordance with Section 2.11 of this Agreement shall not be deemed to be Cash and Cash Equivalents for purposes of an upward adjustment to the Purchase Price unless such cash deemed to be received by the Company shall be cash immediately available to the Surviving Corporation immediately after the Effective Time.

 

ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

The Company hereby represents and warrants the following to Parent and Newco as of the date hereof and (except for any representations and warranties that speak as of a different specified date) as of the Closing as hereafter set forth in this Article III:

 

Section 3.1 Organization and Qualification; Subsidiaries. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Colorado. Except as set forth in Schedule 3.1 , the Company has the corporate power and authority to own or lease its property and assets and to carry on its business as presently conducted, and is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction wherein the nature of its business or the ownership of its assets makes such qualification necessary, except where the failure to be so qualified and in good standing would not have a Material Adverse Effect. Each Subsidiary of the Company is a business entity that is duly organized, validly existing and (to the extent relevant in the jurisdiction of organization) in

 

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good standing under the laws of its jurisdiction of organization, has all organizational powers to own or lease its property and assets and to carry on its business as presently conducted, and is duly qualified to do business as a foreign corporation and (to the extent relevant in other jurisdictions) is in good standing in each jurisdiction wherein the nature of its business or the ownership of its assets makes such qualification necessary, except where the failure to be so qualified and in good standing would not have a Material Adverse Effect. The Company has previously provided to Parent true and complete copies of (i) its Articles of Incorporation and all amendments thereto or restatements thereof, (ii) its bylaws as currently in effect and (iii) true and complete copies of the certificate or articles of incorporation and bylaws (or equivalent governing instruments), as currently in effect, of each Subsidiary.

 

Section 3.2 Authorization. The Company has all requisite corporate power and authority to execute and deliver this Agreement and each other Merger Document to be executed by the Company in connection herewith and to perform its obligations hereunder and thereunder, all of which have been duly authorized by all necessary corporate action, subject to the approval of the requisite shareholders of the Company. This Agreement has been duly authorized, executed and delivered by the Company and, assuming that this Agreement has been duly and validly authorized, executed and delivered by Parent and Newco, constitutes a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except as the enforceability hereof may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally or (ii) applicable equitable principles (whether considered in a proceeding at law or in equity).

 

Upon receipt of the Shareholder Approval, and assuming the Agreement has been duly authorized by all necessary corporate action on the part of Parent and Newco, the Agreement, the Merger and the transaction contemplated hereby will have been approved by all corporate action required by the CBCA, the Articles of Incorporation and the bylaws of the Company, and will be sufficient (i) to grant to the Shareholder Representative (and any of its replacements as contemplated by Section 9.1(f) ) the power and authority to incur obligations and to execute documents (including the Escrow Agreement) that are legally binding on the Shareholders, to make decisions and settle disputes on behalf of the Shareholders as contemplated in Section 9.1 and elsewhere in this Agreement and the Escrow Agreement, and to otherwise act on behalf of the Shareholders as contemplated by this Agreement and the Escrow Agreement and (ii) to obligate the Shareholders to provide the indemnification contemplated by Section 9.1(b) .

 

Section 3.3 Non-contravention. None of the execution and delivery of this Agreement or any other Merger Document, the consummation of the Merger and the other transactions contemplated hereby and thereby nor the fulfillment of and the performance by the Company of its obligations hereunder and thereunder will (i) contravene any provision contained in the Company’s Articles of Incorporation or bylaws or, (ii) except as set forth in Schedule 3.3 , conflict with, violate or result in a breach (with or without the lapse of time, the giving of notice, or both) of, or constitute a default under or give rise to any right of termination, cancellation, acceleration or to a loss of any benefit (with or without the lapse of time, the giving of notice, or both) under (A) any contract, agreement, commitment, indenture, mortgage, lease, pledge, note, bond, license, permit or other instrument or obligation or (B) to the Company’s Knowledge, any judgment, order, decree, statute, law, rule or regulation or other restriction of any Governmental

 

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Authority, in each case to which the Company or any of the Subsidiaries is a party or by which any of them is bound or to which any of their respective assets or properties are subject, (iii) except as contemplated herein or with respect to Liens granted to any lender at the Closing in connection with any financing by Parent of the transactions contemplated hereby, result in the creation or imposition of any Lien, other than any Permitted Lien, on any of the assets or properties of the Company or the Subsidiaries, or (iv) except as set forth in Schedule 3.3 , result in the acceleration of, or permit any Person to terminate, modify, cancel, accelerate or declare due and payable prior to its stated maturity, any obligation of the Company or any Subsidiaries, which in the case of any of clauses (ii) through (iv) above, has had or could have a Material Adverse Effect, or could prohibit, materially impair or materially delay the ability of the Company to consummate the transactions contemplated hereby and thereby.

 

Section 3.4 Consents. Except for (i) filing and recordation of appropriate merger documents as required by the CBCA, (ii) filings, permits, authorizations, consents and approvals as may be required under, and other applicable requirements of, the HSR Act, and (iii) filings, consents and approvals set forth in Schedule 3.4 , no notice to, filing with, or authorization, registration, consent or approval of any Governmental Authority or other Person is necessary for the execution, delivery or performance of this Agreement or any other Merger Documents to be executed by the Company or the consummation of the transactions contemplated hereby or thereby by the Company.

 

Section 3.5 Capitalization; Subsidiaries.

 

(a) As of the date hereof, the Company’s authorized capital stock consists solely of (x) 15,000,000 authorized shares of Common Stock and (y) 200,000 shares of preferred stock, par value $.10 per share (“ Preferred Stock ”). The Company’s outstanding shares of capital stock are held beneficially and of record by the Persons set forth in Schedule 3.5(a) in the amounts set forth opposite such Person’s name. No shares of Preferred Stock are issued and outstanding. 2,017,238 shares of Common Stock are reserved for issuance upon exercise of Stock Options under the Option Plans. No shares of the Company’s capital stock are held as treasury shares. Except as set forth in this Section 3.5(a) , Schedule 3.5(a) or in this Agreement, the Company does not have (i) any shares of Common Stock or Preferred Stock reserved