<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
DATED AS OF
AUGUST 29, 2005
AMONG
SMISC, LLC,
MOTORSPORTS AUTHENTICS, INC.,
AND
ACTION PERFORMANCE COMPANIES, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S>
<C>
ARTICLE 1 THE
MERGER............................................................................................
1
SECTION 1.01 The
Merger...........................................................................
1
SECTION 1.02
Closing..............................................................................
2
SECTION 1.03 Effective
Time.......................................................................
2
SECTION 1.04 Effects of
the
Merger................................................................
2
SECTION 1.05 Articles
of Incorporation and
Bylaws.................................................
2
SECTION 1.06
Directors............................................................................
2
ARTICLE 2 EFFECT OF THE MERGER ON THE
CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF
CERTIFICATES...
3
SECTION 2.01 Effect on
Capital
Stock..............................................................
3
SECTION 2.02 Exchange
of
Certificates.............................................................
3
ARTICLE 3 REPRESENTATIONS AND
WARRANTIES........................................................................
6
SECTION 3.01
Representations and Warranties of the
Company........................................
6
SECTION 3.02
Representations and Warranties of Parent
Parties.....................................
25
ARTICLE 4 COVENANTS RELATING TO CONDUCT OF
BUSINESS.............................................................
27
SECTION 4.01 Conduct of
Business..................................................................
27
SECTION 4.02 No
Solicitation......................................................................
32
ARTICLE 5 ADDITIONAL
AGREEMENTS.................................................................................
34
SECTION 5.01
Preparation of the Proxy Statement; Shareholders'
Meeting............................
34
SECTION 5.02 Access to
Information;
Confidentiality...............................................
35
SECTION 5.03
Commercially Reasonable
Efforts......................................................
35
SECTION 5.04
Company
Stock Options;
Warrants......................................................
36
SECTION 5.05
Indemnification, Exculpation and
Insurance...........................................
37
SECTION 5.06 Fees and
Expenses....................................................................
38
SECTION 5.07 Public
Announcements.................................................................
40
SECTION 5.08
Shareholder
Litigation...............................................................
40
SECTION 5.09
Shareholder Agreement
Legend.........................................................
40
SECTION 5.10
Benefit
Plans........................................................................
40
SECTION 5.11 Transfer
Taxes.......................................................................
41
ARTICLE 6 CONDITIONS
PRECEDENT..................................................................................
42
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S>
<C>
SECTION 6.01 Conditions
to Each Party's Obligation to Effect the
Merger...........................
42
SECTION 6.02 Conditions
to Obligations of Parent and
Sub..........................................
42
SECTION 6.03 Conditions
to Obligation of the
Company..............................................
44
SECTION 6.04
Frustration of Closing
Conditions....................................................
44
ARTICLE 7 TERMINATION, AMENDMENT AND
WAIVER.....................................................................
44
SECTION 7.01
Termination..........................................................................
44
SECTION 7.02 Effect of
Termination................................................................
46
SECTION 7.03
Amendment............................................................................
46
SECTION 7.04 Extension;
Waiver....................................................................
46
SECTION 7.05 Procedure
for Termination or
Amendment...............................................
46
ARTICLE 8 GENERAL
PROVISIONS....................................................................................
47
SECTION 8.01
Nonsurvival of Representations and
Warranties........................................
47
SECTION 8.02
Notices..............................................................................
47
SECTION 8.03
Definitions..........................................................................
48
SECTION 8.04
Interpretation.......................................................................
49
SECTION 8.05 Consents
and
Approvals...............................................................
50
SECTION 8.06
Counterparts.........................................................................
50
SECTION 8.07 Entire
Agreement; No Third-Party
Beneficiaries.......................................
50
SECTION 8.08 Governing
Law........................................................................
50
SECTION 8.09
Assignment...........................................................................
50
SECTION 8.10 Specific
Enforcement; Consent to
Jurisdiction........................................
50
SECTION 8.11
Severability.........................................................................
51
SECTION 8.12
Guaranty.............................................................................
51
</TABLE>
-ii-
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND
PLAN OF MERGER (this "Agreement") dated as of August 29,
2005, among SMISC, LLC, a Delaware limited
liability company ("Parent"),
Motorsports Authentics, Inc., an Arizona
corporation ("Sub") and a wholly owned
indirect Subsidiary of Parent, Action
Performance Companies, Inc., an Arizona
corporation (the "Company"), and, for
purposes of Section 3.02 and Section 8.12
only, the members of Parent listed on the
signature pages hereof (the
"Guarantors").
WHEREAS, the
Board of Directors of each of the Company and Sub has adopted,
and the Board of Managers of Parent has
approved, this Agreement and the merger
of Sub with and into the Company (the
"Merger"), upon the terms and subject to
the conditions set forth in this Agreement,
whereby each issued and outstanding
share of common stock, par value $.01 per
share, of the Company ("Company Common
Stock"), other than shares of Company
Common Stock directly owned by Parent, Sub
or the Company, will be converted into the
right to receive $13 in cash;
WHEREAS,
simultaneously with the execution and delivery of this
Agreement
and as a condition to Parent's willingness
to enter into this Agreement, Parent
and a certain shareholder of the Company
(the "Principal Shareholder") have
entered into an agreement (the "Shareholder
Agreement") pursuant to which the
Principal Shareholder has agreed to vote
for, approve and adopt this Agreement
and to take certain other actions in
furtherance of the consummation of the
Merger upon the terms and subject to the
conditions set forth in the Shareholder
Agreement; and
WHEREAS, Parent,
Sub and the Company desire to make certain
representations, warranties, covenants and
agreements in connection with the
Merger and also to prescribe various
conditions to the Merger.
NOW, THEREFORE,
in consideration of the representations, warranties,
covenants and agreements contained in this
Agreement, and subject to the
conditions set forth herein, the parties
hereto agree as follows:
ARTICLE 1
THE MERGER
SECTION 1.01 THE
MERGER. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance
with the Arizona Business Corporation
Act, A.R.S. Sections 10-001 et seq. (the
"Arizona Code"), Sub shall be merged
with and into the Company at the Effective
Time (as defined below). Following
the Effective Time, the separate corporate
existence of Sub shall cease and the
Company shall continue as the surviving
corporation of the Merger (the
"Surviving Corporation") and shall succeed
to and assume all the rights and
obligations of Sub in accordance with the
Arizona Code. The parties agree and
acknowledge that Parent may determine prior
to the Closing Date to revise the
structure or the mechanics of the form of
the merger of the Company with Sub in
a manner to be mutually agreed upon between
the Company and Parent; provided,
however, such revised structure shall not
reduce the Merger Consideration or the
Option and Warrant Consideration in any way
or change or revise any of the other
covenants or conditions of this Agreement
in any meaningful way, except to the
<PAGE>
extent that Parent agrees to make the
Company and its stockholders whole for any
such change. Each of the parties agree to
use commercially reasonable efforts to
take such actions as may be reasonably
requested of each such party to effect
any such revisions to the structure,
including executing any amendments to this
Agreement in a form agreed upon among the
parties.
SECTION 1.02
CLOSING. The closing of the Merger (the "Closing") will take
place at 10:00 a.m. Eastern time on a date
to be specified by the parties, which
shall be no later than the second business
day after satisfaction or (to the
extent permitted by law) waiver of the
conditions set forth in Article 6 (other
than those conditions that by their terms
are to be satisfied at the Closing,
but subject to the satisfaction or (to the
extent permitted by law) waiver of
those conditions), at the offices of Baker
Botts L.L.P., 1299 Pennsylvania
Avenue, N.W., Washington, D.C. 20004,
unless another time, date or place is
agreed to in writing by Parent and the
Company; provided, however, that if all
the conditions set forth in Article 6 shall
not have been satisfied or (to the
extent permitted by law) waived on such
second business day, then the Closing
shall take place on the first business day
following the day on which all such
conditions shall have been satisfied or (to
the extent permitted by law) waived.
The date on which the Closing occurs is
referred to in this Agreement as the
"Closing Date".
SECTION 1.03
EFFECTIVE TIME. Subject to the provisions of this Agreement,
as soon as practicable on the Closing Date,
the parties shall file with the
Corporation Commission of the State of
Arizona articles of merger (the "Articles
of Merger") executed and acknowledged by
the parties in accordance with the
relevant provisions of the Arizona Code
and, as soon as practicable on or after
the Closing Date, the Surviving Corporation
shall make all other filings or
recordings required under the Arizona Code.
The Merger shall become effective
upon the filing of the Articles of Merger
with the Corporation Commission of the
State of Arizona, or at such other time as
Parent and the Company shall agree
and shall specify in the Articles of Merger
(the time the Merger becomes
effective being referred to in this
Agreement as the "Effective Time").
SECTION 1.04
EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in Article 10-1106(A) of the Arizona
Code.
SECTION 1.05
ARTICLES OF INCORPORATION AND BYLAWS.
(a) The First Amended and Restated Articles of Incorporation of
the
Company (the "Company Charter"), as in
effect immediately prior to the Effective
Time, shall be amended at the Effective
Time to be in the form of Exhibit A and,
as so amended, such Company Charter shall
be the Articles of Incorporation of
the Surviving Corporation until thereafter
changed or amended as provided
therein or by applicable law.
(b) The Bylaws of Sub, as in effect immediately prior to the
Effective
Time, shall be the Bylaws of the Surviving
Corporation until thereafter changed
or amended as provided therein or by
applicable law.
SECTION 1.06
DIRECTORS. Set forth on Schedule 1.06 of the Company
Disclosure Schedule is a list of persons
who shall be the directors of the
Surviving Corporation until the earlier of
their resignation or removal or until
their respective successors are duly
elected and qualified, as the case may be.
2
<PAGE>
ARTICLE 2
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.01
EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue of
the Merger and without any action on the
part of the holder of any shares of
Company Common Stock or any member
interests of Parent or shares of capital
stock of Sub:
(a) CAPITAL STOCK OF SUB. Each issued and outstanding share of
capital
stock of Sub shall be converted into and
become one validly issued, fully paid
and nonassessable share of common stock,
par value $.01 per share, of the
Surviving Corporation.
(b) CANCELLATION OF TREASURY STOCK AND PARENT-OWNED STOCK. Each
share
of Company Common Stock that is directly
owned by the Company, Parent or Sub
immediately prior to the Effective Time
shall automatically be cancelled and
retired and shall cease to exist, and no
consideration shall be delivered in
exchange therefor.
(c) CONVERSION OF
COMPANY COMMON STOCK. Subject to Section 2.02(e),
each share of Company Common Stock issued
and outstanding immediately prior to
the Effective Time (other than shares to be
cancelled in accordance with Section
2.01(b)) shall be converted into the right
to receive $13.00 in cash, without
interest (the "Merger Consideration"). At
the Effective Time, all such shares of
Company Common Stock shall no longer be
outstanding and shall automatically be
cancelled and retired and shall cease to
exist, and each holder of a certificate
which immediately prior to the Effective
Time represented any such shares of
Company Common Stock (each, a
"Certificate") shall cease to have any rights with
respect thereto, except the right to
receive the Merger Consideration. The right
of any holder of a Certificate to receive
the Merger Consideration shall be
subject to and reduced by the amount of any
withholding that is required under
applicable tax law.
(d) OPTIONS AND WARRANTS. In accordance with and as provided in
Section 5.04, each holder of Company Stock
Options or Warrants shall be entitled
to receive the amounts specified in Section
5.04(a) and Section 5.04(b),
respectively (the "Option and Warrant
Consideration").
SECTION 2.02
EXCHANGE OF CERTIFICATES.
(a) PAYING AGENT. Prior to the Effective Time, Parent shall appoint
a
bank or trust company reasonably acceptable
to the Company to act as paying
agent (the "Paying Agent") for the payment
of the Merger Consideration and the
Option and Warrant Consideration. At the
Effective Time, Parent shall deposit,
or cause the Surviving Corporation to
deposit, with the Paying Agent, for the
benefit of the holders of Certificates,
Company Stock Options and Warrants cash
in an amount sufficient to pay the
aggregate Merger Consideration and Option and
Warrant Consideration required to be paid
pursuant to Section 2.01(c) and
Section 2.01(d), respectively (such cash
being hereinafter referred to as the
"Exchange Fund").
3
<PAGE>
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable after
the
Effective Time, Parent shall cause the
Paying Agent to mail to each holder of
record of shares of Company Common Stock
entitled to receive the Merger
Consideration (i) a form of letter of
transmittal (which shall specify that
delivery shall be effected, and risk of
loss and title to the Certificates shall
pass, only upon proper delivery of the
Certificates to the Paying Agent and
which shall contain other provisions as
Parent may reasonably specify) and (ii)
instructions for use in effecting the
surrender of the Certificates in exchange
for the Merger Consideration. Each holder
of record of one or more Certificates
shall, upon surrender to the Paying Agent
of such Certificate or Certificates,
together with such letter of transmittal,
duly executed, and such other
documents as may reasonably be required by
the Paying Agent, be entitled to
receive in exchange therefor the amount of
cash which the number of shares of
Company Common Stock previously represented
by such Certificate shall have been
converted into the right to receive
pursuant to Section 2.01(c), and the
Certificates so surrendered shall forthwith
be cancelled. In the event of a
transfer of ownership of Company Common
Stock which is not registered in the
transfer records of the Company, payment of
the Merger Consideration in
accordance with this Section 2.02(b) may be
made to a person other than the
person in whose name the Certificate so
surrendered is registered if such
Certificate shall be properly endorsed or
otherwise be in proper form for
transfer and the person requesting such
payment shall pay any transfer or other
taxes required by reason of the payment of
the Merger Consideration to a person
other than the registered holder of such
Certificate, or establish to the
reasonable satisfaction of Parent that such
taxes have been paid or are not
applicable. Until surrendered as
contemplated by this Section 2.02(b), each
Certificate shall be deemed at any time
after the Effective Time to represent
only the right to receive upon such
surrender the Merger Consideration pursuant
to the provisions of this Article 2. No
interest shall be paid or will accrue on
any cash payable to holders of Certificates
pursuant to the provisions of this
Article 2. As soon as reasonably
practicable after the Effective Time, Parent
shall cause the Paying Agent to make any
payments required pursuant to Section
2.01(d).
(c) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All cash
paid
upon the surrender of Certificates in
accordance with the terms of this Article
2 shall be deemed to have been paid in full
satisfaction of all rights
pertaining to the shares of Company Common
Stock formerly represented by such
Certificates. At the close of business on
the day on which the Effective Time
occurs, the share transfer books of the
Company shall be closed, and there shall
be no further registration of transfers on
the share transfer books of the
Surviving Corporation of the shares of
Company Common Stock that were
outstanding immediately prior to the
Effective Time. If, after the Effective
Time, any Certificate is presented to the
Surviving Corporation for transfer, it
shall be cancelled against delivery of the
Merger Consideration to the holder
thereof as provided in this Article 2.
(d) TERMINATION OF THE EXCHANGE FUND. Any portion of the Exchange
Fund
which remains undistributed to the holders
of the Certificates for six months
after the Effective Time shall be delivered
to Parent, upon demand, and any
holders of the Certificates who have not
theretofore complied with this Article
2 shall thereafter look only to Parent for,
and Parent shall remain liable for,
payment of their claim for the Merger
Consideration.
(e)
NO LIABILITY. None of Parent, Sub, the Company, the Surviving
Corporation or the Paying Agent shall be
liable to any person in respect of any
cash from the
4
<PAGE>
Exchange Fund delivered to a public
official pursuant to any applicable
abandoned property, escheat or similar law.
If any Certificate shall not have
been surrendered prior to two years after
the Effective Time (or immediately
prior to such earlier date on which any
Merger Consideration would otherwise
escheat to or become the property of any
Governmental Entity (as defined
below)), any such Merger Consideration
shall, to the extent permitted by
applicable law, become the property of
Parent, free and clear of all claims or
interest of any person previously entitled
thereto.
(f) INVESTMENT OF EXCHANGE FUND. The Paying Agent shall invest
the
cash included in the Exchange Fund as
directed by Parent, in (i) securities
issued or directly and fully guaranteed or
insured by the United States of
America or any agency or instrumentality
thereof (provided that the full faith
and credit of the United States of America
is pledged in support thereof), (ii)
U.S. dollar denominated (or foreign
currency fully hedged) time deposits,
certificates of deposit, Eurodollar time
deposits and Eurodollar certificates of
deposit of (y) any domestic commercial bank
of recognized standing having
capital and surplus in excess of
$250,000,000 or (z) any bank whose short-term
commercial paper rating from Standard &
Poor's ("S&P") is at least A-1 or the
equivalent thereof or from Moody's Investor
Services, Inc. ("Moody's") is at
least P-1 or the equivalent thereof, (iii)
U.S. dollar denominated deposits in
and cash management functions with banks
domiciled in the United States of
America, (iv) commercial paper and variable
or fixed rate notes issued by or
guaranteed by any domestic corporation
rated A-1 (or the equivalent thereof) or
better by S&P or P-1 (or the equivalent
thereof) or better by Moody's, (v)
repurchase agreements with a bank or trust
company or a recognized securities
dealer having capital and surplus in excess
of $500,000,000 for direct
obligations issued by or fully guaranteed
by the United States of America and
(vi) U.S. Security Exchange Corporation
registered or unregistered money market
funds with a rating from S&P that is at
least A-1 or the equivalent thereof or
from Moody's that is at least P-1 or the
equivalent thereof.
(g) LOST CERTIFICATES. If any Certificate shall have been lost,
stolen
or destroyed, upon the making of an
affidavit of that fact by the person
claiming such Certificate to be lost,
stolen or destroyed and, if required by
Parent, the posting by such person of a
bond in such amount as Parent may direct
as indemnity against any claim that may be
made against it with respect to such
Certificate, the Paying Agent shall deliver
in exchange for such lost, stolen or
destroyed Certificate the applicable Merger
Consideration in respect thereof
pursuant to the provisions of this Article
2.
(h) WITHHOLDING RIGHTS. Parent, the Surviving Corporation or
the
Paying Agent shall be entitled to deduct
and withhold from the consideration
otherwise payable pursuant to this
Agreement to any holder of Certificates such
amounts as Parent, the Surviving
Corporation or the Paying Agent 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"), or any provision of
state, local or foreign tax law. To the
extent that amounts are so withheld and
paid over to the appropriate taxing
authority by Parent, the Surviving
Corporation or the Paying Agent, such
withheld amounts shall be treated for all
purposes of this Agreement as having been
paid to the holder of the Certificates
in respect of which such deduction and
withholding was made by Parent, the
Surviving Corporation or the Paying
Agent.
5
<PAGE>
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
SECTION 3.01
REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set
forth in the disclosure schedule (with
specific reference to the particular
Section or subsection of this Agreement to
which the information set forth in
such disclosure schedule relates) delivered
by the Company to Parent prior to
the execution of this Agreement (the
"Company Disclosure Schedule"), the Company
represents and warrants to Parent and Sub
as follows:
(a) ORGANIZATION, STANDING AND CORPORATE POWER. Each of the
Company
and its Subsidiaries has been duly
organized, and is validly existing and in
good standing under the laws of the
jurisdiction of its incorporation or
formation, as the case may be. Each of the
Company and its Subsidiaries have all
requisite power and authority and possesses
all governmental licenses, permits,
authorizations and approvals necessary to
enable it to use its corporate or
other name and to own, lease or otherwise
hold and operate its properties and
other assets and to carry on its business
as presently conducted other than such
corporate power and authority, franchises,
licenses, permits, authorizations and
approvals the lack of which, individually
and in the aggregate, would not
reasonably be expected to have a Material
Adverse Effect. Each of the Company
and its Subsidiaries is duly qualified or
licensed to do business and is in good
standing 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, such jurisdictions
being set forth on Section 3.01(a) of
the Company Disclosure Schedule, other than
in such jurisdictions where the
failure to be so qualified or licensed
individually or in the aggregate would
not reasonably be expected to have a
Material Adverse Effect. The Company has
made available to Parent prior to the
execution of this Agreement complete and
accurate copies of the Company Charter and
its Bylaws (the "Company Bylaws"),
and the comparable organizational documents
of each of its Subsidiaries, in each
case as amended to the date hereof. The
Company has made available to Parent
complete and accurate copies of the minutes
(or, in the case of minutes that
have not yet been finalized, drafts
thereof) of all meetings of the shareholders
of the Company and each of its
Subsidiaries, the Board of Directors of the
Company and each of its Subsidiaries and
the committees of each such Board of
Directors, in each case held since October
1, 1999 and prior to the date hereof.
(b) SUBSIDIARIES. Section 3.01(b) of the Company Disclosure
Schedule
lists each of the Subsidiaries of the
Company and, for each such Subsidiary, the
state of incorporation or formation and, as
of the date hereof, each
jurisdiction in which such Subsidiary is
qualified or licensed to do business.
Except as set forth in Section 3.01(b) of
the Company Disclosure Schedule, all
the issued and outstanding shares of
capital stock of, or other equity interests
in, each such Subsidiary have been validly
issued and are fully paid and
nonassessable and are owned directly or
indirectly by the Company free and clear
of all pledges, claims, liens, charges,
encumbrances or security interests of
any kind or nature whatsoever
(collectively, "Liens"), and free of any
restriction on the right to vote, sell or
otherwise dispose of such capital
stock or other equity interests. Except for
the capital stock of, or voting
securities or equity interests in, its
Subsidiaries, the Company does not own,
directly or indirectly, any capital stock
of, or other voting securities or
equity interests in, any corporation,
partnership, joint venture, association or
other entity.
6
<PAGE>
(c) CAPITAL STRUCTURE.
(i) The authorized capital stock of the Company consists of
62,500,000 shares of Company Common Stock
and 5,000,000 shares of preferred
stock, par value $.01 per share ("Company
Preferred Stock"). At the close of
business on August 29, 2005, (i) 18,858,711
shares of Company Common Stock were
issued and outstanding, (ii) 190,000 shares
of Company Common Stock were held by
the Company in its treasury, (iii)
2,144,606 shares of Company Common Stock were
subject to outstanding Company Stock
Options under the Company's 1993 Stock
Option Plan, 1998 Non-Qualified Stock
Option Plan, 1999 Employee Stock Purchase
Plan, and 2000 Stock Option Plan, each as
amended to the date hereof (such
plans, collectively, the "Company Stock
Plans") , (iv) no shares of Company
Preferred Stock were issued or outstanding
or were held by the Company as
treasury shares, and (v) warrants to
acquire 565,000 shares of Company Common
Stock from the Company pursuant to the
warrant agreements set forth on Section
3.01(c) of the Company Disclosure Schedule
and previously delivered in complete
and correct form to Parent (the "Warrants")
were issued and outstanding.
(ii) Except as set forth above in this Section 3.01(c), at the
close of business on August 29, 2005, no
shares of capital stock or other voting
securities or equity interests of the
Company were issued, reserved for issuance
or outstanding. There are no outstanding
stock appreciation rights, "phantom"
stock rights, performance units, rights to
receive shares of Company Common
Stock on a deferred basis or other rights
(other than Company Stock Options and
the Warrants) that are linked to the value
of Company Common Stock
(collectively, "Company Stock-Based
Awards"). Section 3.01(c) of the Company
Disclosure Schedule sets forth a complete
and accurate list, as of August 29,
2005, of all outstanding options to
purchase shares of Company Common Stock
(collectively, "Company Stock Options")
under the Company Stock Plans
(including, but not limited to, the
Company's 1999 Employee Stock Purchase
Plan), and all outstanding Warrants, the
number of shares of Company Common
Stock (or other stock) subject thereto, the
grant dates, expiration dates,
exercise or base prices (if applicable) and
vesting schedules thereof and the
names of the holders thereof.
(iii) There are no outstanding shares of Company Common Stock
in
respect of which the Company has a right
under specified circumstances to
repurchase such shares at a fixed purchase
price.
(iv) All outstanding Company Stock Options are evidenced by
stock
option agreements, restricted stock
purchase agreements or other award
agreements, in each case in the forms
previously delivered or made available to
Parent, and no stock option agreement,
restricted stock purchase agreement or
other award agreement contains terms that
are materially inconsistent with such
forms.
(v) Each Company Stock Option may, by its terms, be cancelled
in
connection with the transactions
contemplated hereby for a lump sum payment in
accordance with and to the extent required
by Section 5.04(a). All Warrants may,
by their terms, be cancelled in exchange
for a lump sum cash payment in
accordance with and to the extent required
by Section 5.04(b).
7
<PAGE>
(vi) All outstanding shares of capital stock of the Company
are,
and all shares which may be issued prior to
the Effective Time pursuant to the
Company Stock Options or the Warrants will
be when issued in accordance with the
terms thereof, duly authorized, validly
issued, fully paid and nonassessable and
not subject to preemptive rights.
(vii) There are no bonds, debentures, notes or other
indebtedness
of the Company having the right to vote (or
convertible into, or exchangeable
for, securities having the right to vote)
on any matters on which shareholders
of the Company may vote.
(viii) Except as set forth above in this Section 3.01(c) or in
Section 3.01(c) of the Company Disclosure
Schedule, (x) there are not issued,
reserved for issuance or outstanding (A)
any shares of capital stock or other
voting securities or equity interests of
the Company, (B) any securities of the
Company convertible into or exchangeable or
exercisable for shares of capital
stock or other voting securities or equity
interests of the Company, or (C) any
warrants, calls, options or other rights to
acquire from the Company or any of
its Subsidiaries, and no obligation of the
Company or any of its Subsidiaries to
issue, any capital stock, voting
securities, equity interests or securities
convertible into or exchangeable or
exercisable for capital stock or voting
securities of the Company and (y) there are
not any outstanding obligations of
the Company or any of its Subsidiaries to
repurchase, redeem or otherwise
acquire any such securities or to issue,
deliver or sell, or cause to be issued,
delivered or sold, any such securities.
Neither the Company nor any of its
Subsidiaries is a party to any voting
agreement with respect to the voting of
any such securities.
(ix) Except as set forth above in this Section 3.01(c) or
Section
3.01(c) of the Company Disclosure Schedule,
there are no outstanding (1)
securities of the Company or any of its
Subsidiaries convertible into or
exchangeable or exercisable for shares of
capital stock or voting securities or
equity interests of any Subsidiary of the
Company, (2) warrants, calls, options
or other rights to acquire from the Company
or any of its Subsidiaries, and no
obligation of the Company or any of its
Subsidiaries to issue, any capital
stock, voting securities, equity interests
or securities convertible into or
exchangeable or exercisable for capital
stock or voting securities of any
Subsidiary of the Company or (3)
obligations of the Company or any of its
Subsidiaries to repurchase, redeem or
otherwise acquire any such outstanding
securities or to issue, deliver or sell, or
cause to be issued, delivered or
sold, any such securities.
(d) AUTHORITY. The Company has all requisite corporate power
and
authority to execute and deliver this
Agreement and, subject to receipt of the
Shareholder Approval, to consummate the
transactions contemplated by this
Agreement. The execution and delivery of
this Agreement by the Company and the
consummation by the Company of the
transactions contemplated by this Agreement
have been duly authorized by all necessary
corporate action on the part of the
Company and no other corporate proceedings
on the part of the Company are
necessary to authorize this Agreement or to
consummate the transactions
contemplated hereby, subject, in the case
of the consummation of the Merger, to
the obtaining of the Shareholder Approval.
This Agreement has been duly executed
and delivered by the Company and, assuming
the due authorization, execution and
delivery by each of the other parties
hereto, constitutes a legal, valid and
binding obligation of the Company,
enforceable against the Company in accordance
with its terms, subject to bankruptcy,
insolvency, fraudulent transfer,
reorganization, moratorium and similar laws
of general applicability relating to
or affecting
8
<PAGE>
creditors' rights, and to general equity
principles. The Board of Directors of
the Company, at a meeting duly called and
held at which all directors of the
Company were present, duly and unanimously
adopted resolutions (i) adopting this
Agreement and approving the Merger and the
other transactions contemplated by
this Agreement, (ii) determining that it is
in the best interests of the
shareholders of the Company that the
Company enter into this Agreement and
consummate the Merger and the other
transactions contemplated by this Agreement
on the terms and subject to the conditions
set forth in this Agreement, (iii)
directing that the adoption of this
Agreement be submitted as promptly as
practicable to a vote at a meeting of the
shareholders of the Company and (iv)
recommending that the shareholders of the
Company approve this Agreement, which
resolutions have not been subsequently
rescinded, modified or withdrawn in any
way.
(e) NONCONTRAVENTION. Except as set forth in Section 3.01(e) of
the
Company Disclosure Schedule, the execution
and delivery of this Agreement do
not, and the consummation of the Merger and
the other transactions contemplated
by this Agreement and compliance with the
provisions of this Agreement will not,
conflict with, or result in any violation
or breach of, or default (with or
without notice or lapse of time, or both)
under, or give rise to a right of
termination, cancellation or acceleration
of any obligation or to the loss of a
benefit under, or result in the creation of
any Lien in or upon any of the
properties or other assets of the Company
or any of its Subsidiaries under:
(i) the Company Charter or the Company Bylaws or the comparable
organizational documents of any of the
Company's Subsidiaries;
(ii) any loan or credit agreement, bond, debenture, note,
mortgage, indenture, lease or other
contract, agreement, obligation, commitment,
arrangement, understanding, instrument,
permit, franchise or license, whether
oral or written (each, including all
amendments thereto, a "Contract"), to which
the Company or any of its Subsidiaries is a
party or any of their respective
properties or other assets is subject;
or
(iii) subject to the governmental filings, the obtaining of the
Shareholder Approval and the other matters
referred to in the following sentence
and in Section 3.01(f) below, any (A)
statute, law, ordinance, rule or
regulation or (B) order, writ, injunction,
decree, judgment or stipulation, in
each case applicable to the Company or any
of its Subsidiaries or their
respective properties or other assets;
other than, in the case of clauses (ii) and
(iii), any such conflicts,
violations, breaches, defaults, rights,
losses or Liens that individually or in
the aggregate would not reasonably be
expected to have a Material Adverse
Effect.
(f) CONSENTS. Except as set forth in Section 3.01(f) of the
Company
Disclosure Schedule, no consent, approval,
order or authorization of, action by
or in respect of, or registration,
declaration or filing with, any Federal,
state, local or foreign government, any
court, administrative, regulatory or
other governmental agency, commission or
authority or any non-governmental
self-regulatory agency, commission or
authority (each, a "Governmental Entity")
is required to be obtained or made by or
with respect to the Company or any of
its Subsidiaries in connection with the
execution and delivery of this Agreement
by the Company or
9
<PAGE>
the consummation of the Merger or the other
transactions contemplated by this
Agreement, except for:
(i) the filing of a premerger notification and report form by
the
Company under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as
amended, and the rules and regulations
thereunder (the "HSR Act"), and the
receipt, termination or expiration, as
applicable, of approvals or waiting
periods required under the HSR Act or any
other applicable competition, merger
control, antitrust or similar law or
regulation;
(ii) the filing with the United States Securities and Exchange
Commission (the "SEC") of (A) a proxy
statement relating to the approval by the
shareholders of the Company of this
Agreement (as amended or supplemented from
time to time, the "Proxy Statement") and
(B) such reports under Section 13(a),
13(d), 15(d) or 16(a) of the Securities
Exchange Act of 1934, as amended (the
"Exchange Act"), as may be required in
connection with this Agreement and the
transactions contemplated by this
Agreement;
(iii) the filing of the Articles of Merger with the Corporation
Commission of the State of Arizona and
appropriate documents with the relevant
authorities of other states in which the
Company or any of its Subsidiaries is
qualified to do business;
(iv) any filings required under the rules and regulations of
the
New York Stock Exchange; and
(v) such other consents, approvals, orders, authorizations,
registrations, declarations and filings the
failure of which to be obtained or
made individually or in the aggregate would
not reasonably be expected to have a
Material Adverse Effect.
(g) COMPANY SEC DOCUMENTS. Except as set forth in Section 3.01(g)
of
the Company Disclosure Schedule, the
Company has filed all reports, schedules,
forms, statements and other documents
(including exhibits and other information
incorporated therein) with the SEC required
to be filed by the Company since
October 1, 2002 (the "Company SEC
Documents"). As of their respective dates, the
Company SEC Documents complied in all
material respects with the requirements of
the Securities Act of 1933, as amended (the
"Securities Act"), or the Securities
Exchange Act of 1934, as amended (the
"Exchange Act"), as the case may be, and
the rules and regulations of the SEC
promulgated thereunder applicable to such
Company SEC Documents, and none of the
Company SEC Documents contained any
untrue statement of a material fact or
omitted to state a material fact required
to be stated therein or necessary in order
to make the statements therein, in
light of the circumstances under which they
were made, not misleading. The
Company SEC Documents identify all
transactions required to bedisclosed pursuant
to Item 404 of Regulation S-K ("Related
Party Transactions"and any person
described in Item 404 of Regulation S-K, a
"Related Party"). As of the date
hereof, management has not determined that
it will have, as of September 30,
2005, a material weakness in its internal
controls. Except to the extent that
information contained in any Company SEC
Document has been revised or superseded
by a later-filed Company SEC Document, none
of the Company SEC Documents
contains any untrue statement of a material
fact or omits to state any material
fact required to be stated therein or
necessary in order to make the statements
therein, in light of the circumstances
under which they were made, not
10
<PAGE>
misleading. The consolidated financial
statements (including the related notes)
of the Company included in the Company SEC
Documents comply as to form in all
material respects with applicable
accounting requirements and the published
rules and regulations of the SEC with
respect thereto, have been prepared in
accordance with generally accepted
accounting principles in the United States
("GAAP") (except, in the case of unaudited
statements, as permitted by Form 10-Q
of the SEC) applied on a consistent basis
during the periods involved (except as
may be indicated in the notes thereto) and
fairly present, in all material
respects, the consolidated financial
position of the Company and its
consolidated Subsidiaries as of the dates
thereof and the consolidated results
of their operations and cash flows for the
periods shown (subject, in the case
of unaudited statements, to normal and
recurring year-end audit adjustments).
None of the Subsidiaries of the Company
are, or have at any time been, subject
to the reporting requirements of Sections
13(a) and 15(d) of the Exchange Act.
(h) NO ADDITIONAL LIABILITIES. Except (i) as set forth in the
most
recent financial statements included in the
Company SEC Documents filed or
furnished by the Company during the past 12
months and publicly available prior
to the date of this Agreement (the "Filed
Company SEC Documents"), (ii) incurred
since June 30, 2005 in the ordinary course
of business, or (iii) set forth in
Section 3.01(h) of the Company Disclosure
Schedule, neither the Company nor any
of its Subsidiaries has any liabilities or
obligations of any nature (whether
accrued, absolute, contingent or otherwise)
which individually or in the
aggregate would reasonably be expected to
have a Material Adverse Effect.
(i) INFORMATION SUPPLIED. None of the information supplied or to
be
supplied by the Company specifically for
inclusion or incorporation by reference
in the Proxy Statement will, at the date it
is first mailed to the shareholders
of the Company and at the time of the
Shareholders' Meeting, contain any untrue
statement of a material fact or omit to
state any material fact required to be
stated therein or necessary in order to
make the statements therein, in light of
the circumstances under which they are
made, not misleading, except that no
representation or warranty is made by the
Company with respect to statements
made or incorporated by reference therein
based on information supplied by
Parent or Sub in writing specifically for
inclusion or incorporation by
reference in the Proxy Statement. The Proxy
Statement will comply as to form in
all material respects with the requirements
of the Exchange Act and the rules
and regulations thereunder.
(j) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except for
liabilities
incurred in connection with this Agreement
or as set forth in Section 3.01(j) of
the Company Disclosure Schedule or included
in Filed Company SEC Documents,
since June 30, 2005, the Company and its
Subsidiaries have conducted their
respective businesses only in the ordinary
course consistent with past practice,
and from such date until the date hereof
there has not been:
(i) any event, change, effect, development, condition or
occurrence that, individually or in the
aggregate, would reasonably be expected
to have a Material Adverse Effect,
including but not limited to, other than as
referenced in any Filed Company SEC
Document, any failure by the Company to
preserve intact its current business
organizations, keep available the services
of its officers, employees and consultants
and preserve its relationships with
customers, suppliers, licensors, licensees,
distributors and others having
business dealings with it;
11
<PAGE>
(ii) any declaration, setting aside or payment of any dividend
or
other distribution (whether in cash, stock
or property) with respect to any
capital stock of the Company or any of its
Subsidiaries, other than dividends or
distributions by a direct or indirect
wholly owned Subsidiary of the Company to
its shareholders;
(iii) any purchase, redemption or other acquisition by the
Company or any of its Subsidiaries of any
shares of capital stock or any other
securities of the Company or any of its
Subsidiaries or of any options,
warrants, calls or rights to acquire such
shares or other securities;
(iv) any split, combination or reclassification of any capital
stock of the Company or any of its
Subsidiaries or any issuance or the
authorization of any issuance of any other
securities in respect of, in lieu of
or in substitution for shares of their
respective capital stock;
(v) (A) any granting by the Company or any of its Subsidiaries
to
any current or former director, officer,
employee or consultant of the Company
or its Subsidiaries of any increase in
compensation, bonus or fringe or other
benefits or any granting of any type of
compensation or benefits to any current
or former director, officer, employee or
consultant not previously receiving or
entitled to receive such type of
compensation or benefit, except for normal
increases in cash compensation to
non-executive employees (including, with
respect to new hires, cash bonus
opportunities and compensation) in the ordinary
course of business consistent with past
practice or as was required under any
Company Benefit Agreement or Company
Benefit Plan in effect as of the date of
the most recent financial statements
included in the Filed Company SEC
Documents, (B) any granting by the Company
or any of its Subsidiaries to any
current or former director, officer,
employee or consultant of the Company or
any of its Subsidiaries of any right to
receive any increase in severance or
termination pay, except (x) in the ordinary
course of business consistent with
past practice in connection with new hires
to replace departed employees and (y)
in the ordinary course of business
consistent with past practice in connection
with promotions made in the ordinary course
of business consistent with past
practice for non-executive employees, (C)
any entry into, adoption by, amendment
by or termination by, the Company or any of
its Subsidiaries of (1) any
employment, deferred compensation,
severance, change of control, termination or
indemnification agreement or any other
agreement, plan or policy (including the
Company Benefit Plans), or any consulting
agreement with aggregate amounts paid
or payable in excess of $50,000, with or
involving any current or former
director, officer, employee or consultant
of the Company or any of its
Subsidiaries other than any of the
foregoing entered into, adopted, amended or
terminated in the ordinary course of
business consistent with past practice with
respect to non-executive employees, or (2)
any agreement with any current or
former director, officer, employee or
consultant of the Company or any of its
Subsidiaries the benefits of which are
contingent, or the terms of which are
materially altered, upon the occurrence of
a transaction involving the Company
of a nature contemplated by this Agreement
(all such agreements under this
clause (C), collectively, "Company Benefit
Agreements"), or (D) any payment of
any benefit under, or the grant of any
award under, or any material amendment
to, or termination of, any bonus,
incentive, performance or other compensation
plan or arrangement, Company Benefit
Agreement or Company Benefit Plan
(including in respect of stock options,
"phantom" stock, stock appreciation
rights, restricted stock, "phantom" stock
rights, restricted stock units,
deferred stock
12
<PAGE>
units, performance stock units or other
stock-based or stock-related awards or
the removal or modification of any
restrictions in any Company Benefit Agreement
or Company Benefit Plan or awards made
thereunder) except as required to comply
with applicable law or any Company Benefit
Agreement or Company Benefit Plan in
effect as of the date of the most recent
audited financial statements included
in the Filed Company SEC Documents;
(vi) any sale, lease, transfer, assignment or other disposition
of any assets material to the business and
operations of the Company and its
Subsidiaries as presently conducted;
(vii) any incurrence of indebtedness for borrowed money or
guarantee of any such indebtedness of
another person, other than the incurrence
of indebtedness under the Amended and
Restated Credit Agreement dated as of June
30, 2004 by and among the Company and
certain subsidiaries and affiliates, as
guarantors, and Bank One, N.A., as amended
as of the date hereof;
(viii) any transfer, assignment, disposition, material
amendment,
termination or other material change to any
Contract between the Company or a
Subsidiary of the Company and any driver,
team owner, sanctioning body,
automobile manufacturer or other material
licensor;
(ix) any damage, destruction or loss, whether or not covered by
insurance, that individually or in the
aggregate would reasonably be expected to
have a Material Adverse Effect;
(x) any change in accounting methods, principles or practices
by
the Company materially affecting its
assets, liabilities or businesses; or
(xi) any material tax election by the Company or any settlement
or compromise of any material income tax
liability by the Company.
(k) LITIGATION. Except as set forth in Section 3.01(k) of the
Company
Disclosure Schedule, there is no suit,
action or proceeding pending or, to the
Knowledge of the Company, threatened
against or affecting the Company or any of
its Subsidiaries or any of their respective
assets that individually or in the
aggregate would reasonably be expected to
have a Material Adverse Effect, nor is
there any judgment, decree, injunction,
rule or order of any Governmental Entity
or arbitrator outstanding against, or, to
the Knowledge of the Company,
investigation by any Governmental Entity
involving, the Company or any of its
Subsidiaries or, to the Company's
Knowledge, any of their respective assets that
individually or in the aggregate would
reasonably be expected to have a Material
Adverse Effect.
(l) CONTRACTS. Except as disclosed in the Filed Company SEC
Documents,
neither the Company nor any of its
Subsidiaries is a party to, and none of their
respective properties or other assets is
subject to, any contract or agreement
that is of a nature required to be filed as
an exhibit to a report or filing
under the Securities Act or the Exchange
Act and the rules and regulations
promulgated thereunder. None of the
Company, any of its Subsidiaries or, to the
Knowledge of the Company, any party thereto
is in violation of or in default
under (nor does there exist any condition
which upon the passage of time or the
giving of notice or both could
13
<PAGE>
cause such a violation of or default under)
any Contract to which it is a party
or by, to the Knowledge of the Company,
which it or any of its properties or
other assets is bound, except for
violations or defaults that individually or in
the aggregate would not reasonably be
expected to have a Material Adverse
Effect. Except as set forth in Section
3.01(l) of the Company Disclosure
Schedule, neither the Company nor any of
its Subsidiaries has entered into any
Contract with any Affiliate of the Company
that is currently in effect other
than agreements that are disclosed in the
Filed Company SEC Documents. Except as
set forth in Section 3.01(l) of the Company
Disclosure Schedule, neither the
Company nor any of its Subsidiaries is a
party to or otherwise bound by any
agreement or covenant restricting the
Company's or any of its Subsidiaries'
ability to compete or by any agreement or
covenant restricting in any respect
the license, marketing, co-promotion,
manufacturing, research, development,
distribution, training, sale or supply of
products or services of the Company or
any of its Subsidiaries.
(m) COMPLIANCE WITH LAWS. Except with respect to Environmental
Laws,
the Employee Retirement Income Security Act
of 1974, as amended ("ERISA") and
taxes, which are the subjects of Sections
3.01(n), 3.01(p) and 3.01(r),
respectively, each of the Company and its
Subsidiaries is in compliance with all
statutes, laws, ordinances, rules,
regulations, judgments, orders and decrees of
any Governmental Entity applicable to it,
its properties or other assets or its
business or operations (collectively,
"Legal Provisions"), except for instances
of noncompliance or possible noncompliance
that individually or in the aggregate
would not reasonably be expected to have a
Material Adverse Effect. Each of the
Company and its Subsidiaries has in effect
all approvals, authorizations,
certificates, filings, franchises,
licenses, notices, permits and rights of or
with all Governmental Entities
(collectively, "Permits") necessary for it to
own, lease or operate its properties and
other assets and to carry on its
business and operations as presently
conducted, except for such Permits the
absence of which, individually or in the
aggregate, would not reasonably be
expected to have a Material Adverse Effect.
No default has occurred under, and
there has been no violation of, any such
Permit, except for any such default or
violations that, individually or in the
aggregate, would not reasonably be
expected to have a Material Adverse Effect.
The consummation of the Merger would
not cause the revocation or cancellation of
any such Permit, other than where
such revocation or cancellation would not
reasonably be expected to have a
Material Adverse Effect. To the Company's
Knowledge, except as set forth in
Section 3.01(m) of the Company Disclosure
Schedule, during the five years
immediately preceding the date hereof,
neither the Company nor any of its
Subsidiaries, nor any employee of the
Company or any Subsidiary of the Company,
nor any other person acting on behalf of
the Company, any such Subsidiary or any
such employee, has given or agreed to give,
directly or indirectly, any gift or
similar benefit to any dealer, supplier,
customer, governmental employee or
other person who is or may be in a position
to help or hinder the Company or any
of its Subsidiaries (or assist the Company
or any of its Subsidiaries in
connection with any actual or proposed
transaction), which might subject the
Company or any of its Subsidiaries to any
damage or penalty in any civil,
criminal or governmental litigation or
proceeding and which, if not continued in
the future, would be reasonably likely to
have a Material Adverse Effect. Except
as set forth in Section 3.01(m) of the
Company Disclosure Schedule, neither the
Company nor any of its Subsidiaries, nor,
to the Knowledge of the Company, any
director, officer, agent or employee of the
Company or any of its Subsidiaries,
has taken any action which would cause the
Company or any of its Subsidiaries to
be in violation of the Foreign Corrupt
Practices Act of 1977 or any applicable
law of similar
14
<PAGE>
effect, except for such violations that,
individually or in the aggregate, would
not reasonably be expected to result in a
criminal proceeding against the
Company.
(n) ENVIRONMENTAL MATTERS.
(i) Except for those matters that individually or in the
aggregate would not reasonably be expected
to have a Material Adverse Effect:
(A) each of the Company and its
Subsidiaries is, and has been, in compliance
with all applicable Environmental Laws and
has obtained and complied with all
material Permits required under any
Environmental Laws to own, lease or operate
its properties or other assets and to carry
on its business and operations as
presently conducted; (B) there have been no
Releases or threatened Releases of
Hazardous Materials in, on, from, under or
affecting any properties currently or
formerly owned, leased or operated by the
Company or any of its Subsidiaries
that reasonably would be expected to form
the basis of any claim against, or
liability or other loss incurred by, the
Company or any of its Subsidiaries or
against or by any person whose liabilities
for such claims the Company or any
Subsidiary has, or may have, retained or
assumed, either contractually or by
operation of law; (C) no investigation,
suit, claim, action, allegation or
proceeding is pending, or to the Knowledge
of the Company, threatened against or
affecting the Company or any of its
Subsidiaries relating to or arising under
Environmental Laws, and neither the Company
nor any of its Subsidiaries has
received any written notice of any such
investigation, suit, claim, action,
allegation or proceeding; and (D) neither
the Company nor any of its
Subsidiaries has retained or assumed by
Contract or operation of law or
otherwise, any obligation or liability that
would reasonably be expected to form
the basis of any claim, liability or other
loss arising under Environmental
Laws.
(ii) The term "Environmental Laws" means all Federal, state,
local and foreign laws (including the
common law), statutes, rules, regulations,
codes, ordinances, orders, decrees,
judgments, injunctions, notices, Permits,
treaties or binding agreements issued,
promulgated or entered into by any
Governmental Entity, relating in any way to
the environment, preservation or
reclamation of natural resources or
threatened, endangered or other special
status species, the presence, management,
Release or threat of Release of, or
exposure to, Hazardous Materials, or to
human health and safety. The term
"Hazardous Materials" means (1) petroleum
products and by-products, asbestos and
asbestos-containing materials, urea
formaldehyde foam insulation, medical or
infectious wastes, polychlorinated
biphenyls, radon gas, chlorofluorocarbons and
all other ozone-depleting substances or (2)
any chemical, material, substance,
waste, pollutant or contaminant for which
the use, treatment, storage,
management, release or disposal is
prohibited, limited or regulated by or
pursuant to any Environmental Law. The term
"Release" means any spilling,
leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping,
leaching, dumping, disposing or migrating
into or through the environment or any
natural or man-made structure.
(o) ABSENCE OF CHANGES IN COMPANY BENEFIT PLANS; LABOR
RELATIONS.
Since the date of the most recent audited
financial statements included in the
Filed Company SEC Documents to the date of
this Agreement, there has not been
any adoption or amendment, in any material
respect, by the Company or any of its
Subsidiaries of any collective bargaining
agreement or material employment,
bonus, pension, profit sharing, deferred
compensation, incentive compensation,
stock ownership, stock purchase, stock
appreciation, restricted stock, stock
option, "phantom" stock, performance,
retirement, thrift, savings, stock bonus,
paid time
15
<PAGE>
off, perquisite, fringe benefit, vacation,
severance, disability, death benefit,
hospitalization, medical, welfare benefit
or other plan, program, policy,
arrangement or understanding (whether or
not legally binding) maintained,
contributed to or required to be maintained
or contributed to by the Company or
any of its Subsidiaries or any other person
or entity that, together with the
Company, is treated as a single employer
under Section 414(b), (c), (m) or (o)
of the Code (each, a "Commonly Controlled
Entity"), in each case providing
benefits to any current or former director,
officer, employee or consultant of
the Company or any of its Subsidiaries
(collectively, the "Company Benefit
Plans"), or any material change in any
actuarial or other assumption used to
calculate funding obligations with respect
to any Company Pension Plans, or any
material change in the manner in which
contributions to any Company Pension
Plans are made or the basis on which such
contributions are determined. Except
as disclosed in the Filed Company SEC
Documents or in Section 3.01(o) of the
Company Disclosure Schedule, there exist no
currently binding Company Benefit
Agreements. There are no collective
bargaining or other labor union agreements
to which the Company or any of its
Subsidiaries is a party or by which the
Company or any of its Subsidiaries is
bound. None of the employees of the
Company or any of its Subsidiaries are
represented by any union with respect to
their employment by the Company or such
Subsidiary. Since October 1, 2004,
neither the Company nor any of its
Subsidiaries has experienced any material
labor disputes, union organization attempts
or work stoppages, slowdowns or
lockouts due to labor disagreements.
(p) ERISA COMPLIANCE.
(i) Section 3.01(p)(i) of the Company Disclosure Schedule
contains a complete and accurate list of
each Company Benefit Plan that is an
"employee pension benefit plan" (as defined
in Section 3(2) of ERISA) (sometimes
referred to herein as a "Company Pension
Plan"), each Company Benefit Plan that
is an "employee welfare benefit plan" (as
defined in Section 3(1) of ERISA) and
all other material Company Benefit Plans.
The Company has provided or made
available to Parent complete and accurate
copies of (A) each Company Benefit
Plan (or, in the case of any unwritten
Company Benefit Plans, descriptions
thereof), (B) the two most recent annual
reports on Form 5500 required to be
filed with the Internal Revenue Service
(the "IRS") with respect to each Company
Benefit Plan (if any such report was
required), (C) the most recent summary plan
description for each Company Benefit Plan
for which such a summary plan
description is required and (D) each trust
agreement and insurance or group
annuity contract relating to any Company
Benefit Plan. Each Company Benefit Plan
has been administered in all material
respects in accordance with its terms. The
Company, its Subsidiaries and all the
Company Benefit Plans are all in
compliance with the applicable provisions
of ERISA, the Code and all other
applicable laws, including laws of foreign
jurisdictions, and the terms of all
collective bargaining agreements, except
for any instances of noncompliance
that, individually or in the aggregate,
would not be reasonably expected to have
a Material Adverse Effect.
(ii) All Company Pension Plans intended to be tax-qualified
have
received favorable determination letters
from the IRS with respect to "TRA" (as
defined in Section 1 of Rev. Proc. 93-39),
and have timely filed with the IRS
determination letter applications with
respect to "GUST" (as defined in Section
1 of Notice 2001-42), to the effect that
such Company Pension Plans are
qualified and exempt from Federal income
taxes under Sections 401(a) and 501(a),
respectively, of the Code, no such
determination letter has been
16
<PAGE>
revoked (nor, to the Knowledge of the
Company, has revocation been threatened)
and no event has occurred since the date of
the most recent determination letter
or application therefor relating to any
such Company Pension Plan that would
reasonably be expected to adversely affect
the qualification of such Company
Pension Plan or materially increase the
costs (individually or in the aggregate)
relating thereto or require security under
Section 307 of ERISA. All Company
Pension Plans required to have been
approved by any foreign Governmental Entity
have been so approved, no such approval has
been revoked (nor, to the Knowledge
of the Company, has revocation been
threatened) and no event has occurred since
the date of the most recent approval or
application therefor relating to any
such Company Pension Plan that would
reasonably be expected to materially affect
any such approval relating thereto or
materially increase the costs
(individually or in the aggregate) relating
thereto. The Company has delivered
to Parent a complete and accurate copy of
the most recent determination letter
received with respect to each Company
Pension Plan, as well as a complete and
accurate copy of each pending application
for a determination letter, if any.
The Company has also provided to Parent a
complete and accurate list of all
amendments to any Company Pension Plan as
to which a favorable determination
letter has not yet been received.
(iii) Neither the Company nor any Commonly Controlled Entity
has
(A) maintained, contributed to or been
required to contribute to any Company
Benefit Plan that is subject to Title IV of
ERISA or (B) has any unsatisfied
liability under Title IV of ERISA.
(iv) All reports, returns and similar documents with respect to
all Company Benefit Plans required to be
filed with any Governmental Entity or
distributed to any Company Benefit Plan
participant have been duly and timely
filed or distributed. None of the Company
or any of its Subsidiaries has
received written notice of, and to the
Knowledge of the Company, there are no
investigations by any Governmental Entity
pending with respect to, termination
proceedings or other claims (except claims
for benefits payable in the normal
operation of the Company Benefit Plans),
suits or proceedings against or
involving any Company Benefit Plan or
asserting any rights or claims to benefits
under any Company Benefit Plan that would
give rise to any material liability
(individually or in the aggregate).
(v) All contributions, premiums and benefit payments under or
in
connection with the Company Benefit Plans
that are required to have been made as
of the date hereof in accordance with the
terms of the Company Benefit Plans
have been timely made or have been
reflected on the most recent consolidated
balance sheet filed or incorporated by
reference into the Filed Company SEC
Documents. Neither any Company Pension Plan
nor any single-employer plan of any
Commonly Controlled Entity has an
"accumulated funding deficiency" (as such term
is defined in Section 302 of ERISA or
Section 412 of the Code), whether or not
waived.
(vi) With respect to each Company Benefit Plan, (A) there has
not
occurred any prohibited transaction (within
the meaning of Section 406 of ERISA
or Section 4975 of the Code) in which the
Company or any of its Subsidiaries or
any of their respective employees, or any
trustee, administrator or other
fiduciary of such Company Benefit Plan, or
any agent of the foregoing, has
engaged that would reasonably be expected
to subject the Company or any of its
Subsidiaries or any of their respective
employees, or, to the Knowledge of the
Company, a trustee, administrator or other
fiduciary of any trust created under
any Company
17
<PAGE>
Benefit Plan, to the tax or penalty on
prohibited transactions imposed by
Section 4975 of the Code or the sanctions
imposed under Title I of ERISA, except
for any such transactions that,
individually or in the aggregate, would not
reasonably be expected to have a Material
Adverse Effect and (B) neither the
Company nor any of its Subsidiaries nor, to
the Knowledge of the Company, any
trustee, administrator or other fiduciary
of any Company Benefit Plan nor any
agent of any of the foregoing, has engaged
in any transaction or acted in a
manner, or failed to act in a manner, that
could reasonably be expected to
subject the Company or any of its
Subsidiaries or, to the Knowledge of the
Company, any trustee, administrator or
other fiduciary, to any liability for
breach of fiduciary duty under ERISA or any
other applicable law, except for any
such transactions that, individually or in
the aggregate, would not reasonably
be expected to have a Material Adverse
Effect. No Company Benefit Plan or
related trust has been terminated, nor has
there been any "reportable event" (as
that term is defined in Section 4043 of
ERISA) for which the 30-day reporting
requirement has not been waived with
respect to any Company Benefit Plan, during
the last five years, and no notice of a
reportable event will be required to be
filed in connection with the transactions
contemplated by this Agreement.
(vii) Section 3.01(p)(vii) of the Company Disclosure Schedule
discloses whether each Company Benefit Plan
that is an employee welfare benefit
plan is (A) unfunded or self-insured, (B)
funded through a "welfare benefit
fund", as such term is defined in Section
419(e) of the Code, or other funding
mechanism or (C) insured. Each such
employee welfare benefit plan may be amended
or terminated (including with respect to
benefits provided to retirees and other
former employees) without material
liability (individually or in the aggregate)
to the Company or any of its Subsidiaries
at any time after the Effective Time.
Each of the Company and its Subsidiaries
complies with the applicable
requirements of Section 4980B(f) of the
Code or any similar state statute with
respect to each Company Benefit Plan that
is a group health plan, as such term
is defined in Section 5000(b)(1) of the
Code or such state statute, except for
any instances of noncompliance that,
individually or in the aggregate, would not
be reasonably expected to have a Material
Adverse Effect. Neither the Company
nor any of its Subsidiaries has any
material obligations (individually or in the
aggregate) for retiree health or life
insurance benefits under any Company
Benefit Plan (other than for continuation
coverage required under Section
4980(f) of the Code).
(viii) Except as set forth in Section 3.01(p)(viii) of the
Company Disclosure Schedule, none of the
execution and delivery of this
Agreement, the Shareholder Agreement, the
obtaining of the Shareholder Approval
or the consummation of the Merger or any
other transaction expressly
contemplated by this Agreement or the
Shareholder Agreement (including as a
result of any termination of employment on
or following the Effective Time) will
(A) entitle any current or former director,
officer, employee or consultant of
the Company or any of its Subsidiaries to
severance or termination pay, (B)
accelerate the time of payment or vesting,
or trigger any payment or funding
(through a grantor trust or otherwise) of,
compensation or benefits under,
increase the amount payable or trigger any
other material obligation
(individually or in the aggregate) pursuant
to, any Company Benefit Plan or
Company Benefit Agreement or (C) result in
any breach or violation of, or a
default under, any Company Benefit Plan or
Company Benefit Agreement. The
Company has provided Parent with an
estimate of the total amount of all payments
and the fair market value of all non-cash
benefits that may become payable or
provided to any director, officer, employee
or consultant of the Company or any
of its Subsidiaries under the Company
Benefit Agreements (assuming for such
purpose that such
18
<PAGE>
individuals' employment were terminated
immediately following the Effective Time
as if the Effective Time were the date
hereof).
(ix) Neither the Company nor any of its Subsidiaries has any
liability or obligations, including under
or on account of a Company Benefit
Plan, arising out of the hiring of persons
to provide services to the Company or
any of its Subsidiaries and treating such
persons as consultants or independent
contractors and not as employees of the
Company or any of its Subsidiaries,
except for any such liabilities or
obligations that, individually or in the
aggregate, would not reasonably be expected
to have a Material Adverse Effect.
(x) No deduction by the Company or any of its Subsidiaries in
respect of any "applicable employee
remuneration" (within the meaning of Section
162(m) of the Code) has been disallowed or
is subject to disallowance by reason
of Section 162(m) of the Code.
(q) NO EXCESS PARACHUTE PAYMENTS. Other than payments or benefits
that
may be made to the persons listed in
Section 3.01(q) of the Company Disclosure
Schedule ("Primary Company Executives"), no
amount or other entitlement or
economic benefit that could be received
(whether in cash or property or the
vesting of property) as a result of the
execution and delivery of this
Agreement, the Shareholder Agreement, the
obtaining of the Shareholder Approval,
the consummation of the Merger or any other
transaction contemplated by this
Agreement or the Shareholder Agreement
(including as a result of termination of
employment on or following the Effective
Time) by or for the benefit of any
director, officer, employee or consultant
of the Company or any of its
Affiliates who is a "disqualified
individual" (as such term is defined in
proposed Treasury Regulation Section
1.280G-1) under any Company Benefit Plan,
Company Benefit Agreement or otherwise
would be set forth therein as an "excess
parachute payment" (as such term is defined
in Section 280G(b)(1) of the Code),
and no such disqualified individual is
entitled to receive any additional
payment from the Company or any of its
Subsidiaries, the Surviving Corporation
or any other person in the event that the
excise tax required by Section 4999(a)
of the Code is imposed on such disqualified
individual (a "Parachute Gross Up
Payment"). The Company has provided Parent
with a calculation, as Section
3.01(q) of the Company Disclosure Schedule
sets forth, calculated as of the date
set forth therein of (i) the "base amount"
(as such term is defined in Section
280G(b)(3) of the Code) for (A) each
Primary Company Executive and (B) each
other disqualified individual (defined as
set forth above) whose Company Stock
Options will vest pursuant to their terms
in connection with the execution and
delivery of this Agreement, the Shareholder
Agreement, the obtaining of the
Shareholder Approval, the consummation of
the Merger or any other transaction
contemplated by this Agreement or the
Shareholder Agreement (including as a
result of any termination of employment on
or following the Effective Time) and
(ii) the estimated maximum amount,
including any Parachute Gross Up Payment,
that could be paid or provided to each
Primary Company Executive as a result of
the execution and delivery of this
Agreement, the Shareholder Agreement, the
obtaining of the Shareholder Approval, the
consummation of the Merger or any
other transaction contemplated by this
Agreement or the Shareholder Agreement
(including as a result of any termination
of employment on or following the
Effective Time), in each case subject to
the assumptions stated therein.
(r) TAXES.
19
<PAGE>
(i) Each of the Company, its Subsidiaries and each Company
Consolidated Group has filed or has caused
to be filed in a timely manner
(within any applicable extension period)
all material tax returns required to be
filed with any taxing authority pursuant to
the Code (and any applicable
Treasury Regulations) or applicable state,
local or foreign tax laws. All such
tax returns are complete and accurate in
all material respects and have been
prepared in substantial compliance with all
applicable laws and regulations.
Each of the Company, its Subsidiaries and
each Company Consolidated Group has
paid or caused to be paid (or the Company
has paid on its behalf) all material
taxes (individually or in the aggregate)
due and owing, and, in accordance with
GAAP, the most recent financial statements
contained in the Filed Company SEC
Documents reflect an adequate reserve
(excluding any reserves for deferred taxes
established to reflect timing differences
between book and tax income) for all
material taxes (individually or in the
aggregate) payable by the Company and its
Subsidiaries for all taxable periods and
portions thereof accrued through the
date of such financial statements.
(ii) No tax return of the Company or any of its Subsidiaries or
any Company Consolidated Group is under
audit or examination by any taxing
authority, and no written notice of such an
audit or examination has been
received by the Company or any of its
Subsidiaries or any Company Consolidated
Group. Except as set forth in Section
3.01(r)(ii) of the Company Disclosure
Schedule, there is no assessed deficiency,
refund litigation, proposed
adjustment or matter in controversy with
respect to any material amount
(individually or in the aggregate) of taxes
due and owing by the Company or any
of its Subsidiaries or any Company
Consolidated Group. Except as set forth in
Section 3.01(r)(ii) of the Company
Disclosure Schedule, each material assessed
deficiency resulting from any completed
audit or examination relating to taxes
by any taxing authority has been timely
paid (including payment of applicable
penalties or interest). No issues relating
to any material amount (individually
or in the aggregate) of taxes were raised
by the relevant taxing authority in
any completed audit or examination that
could reasonably be expected to recur in
a later taxable period. Except as set forth
in Section 3.01(r)(ii) of the
Company Disclosure Schedule, there is no
currently effective agreement or other
document extending, or having the effect of
extending, the period of assessment
or collection of any material taxes of the
Company or its Subsidiaries or any
Company Consolidated Group, nor has any
request been made by the Company, any of
its Subsidiaries or any Company
Consolidated Group for any such extension, and
no power of attorney (other than powers of
attorney authorizing employees of the
Company, any of its Subsidiaries or any
Company Consolidated Group to act on
behalf of the Company, any of its
Subsidiaries or any Company Consolidated
Group) with respect to any taxes has been
executed or filed by the Company, any
of its Subsidiaries or any Company
Consolidated Group with any taxing authority.
(iii) None of the Company or any of its Subsidiaries will be
required to include in a taxable period
ending after the Effective Time taxable
income attributable to income that accrued
(for purposes of the financial
statements of the Company included in the
Filed Company SEC Documents) in a
prior taxable period (or portion of a
taxable period) but was not recognized for
tax purposes in any prior taxable period as
a result of (A) an open transaction
disposition made on or before the Effective
Time, (B) a prepaid amount received
on or prior to the Effective Time, (C) any
method of accounting for tax purposes
(including, without limitation, the
installment method or the long-term contract
method of accounting) or Section 481 of
the
20
<PAGE>
Code or (D) any comparable provisions of
state or local tax law, domestic or
foreign, or for any other reason.
(iv) The Company and its Subsidiaries have complied with all
applicable statutes, laws, ordinances,
rules and regulations relating to the
payment and withholding of any material
amount (individually or in the
aggregate) of taxes and have, within the
time and the manner prescribed by law,
withheld from and paid over to the proper
governmental authorities all material
amounts (individually or in the aggregate)
required to be so withheld and paid
over under applicable laws.
(v) None of the Company or any of its Subsidiaries has
constituted either a "distributing
corporation" or a "controlled corporation" in
a distribution of stock qualifying or
intended to qualify for tax-free treatment
(in whole or in part) under Sections 355 or
361
