AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

AGREEMENT AND PLAN OF MERGER

by and between

THE NEWSMARKET, INC.

and

TNM GROUP INCORPORATED

and

MEDIALINK WORLDWIDE INCORPORATED

Dated as of July 1, 2009

 

 

TABLE OF CONTENTS

 

 

 

AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER, dated as of July 1, 2009 (this “Agreement”), by and between The Newsmarket, Inc. a Delaware corporation (“Parent”), TNM Group Incorporated, a Delaware corporation (“Merger Sub”), and Medialink Worldwide Incorporated, a Delaware corporation (the “Company”).

Parent is the owner of all the issued and outstanding capital stock of Merger Sub.  Parent desires to effect a merger of Merger Sub with and into the Company, with the Company as the surviving corporation in such merger (the “Merger”).

The respective Boards of Directors of Parent, Merger Sub and the Company have approved this Agreement, and deemed it advisable and fair to and in the best interests of their respective companies and stockholders to consummate the Merger.

Concurrently with the execution and delivery of this Agreement, as a condition and inducement to Parent’s and Merger Sub’s willingness to enter into this Agreement, Parent, Merger Sub and holders of approximately 9% of the issued and outstanding shares of common stock of the Company, par value $.01 per share (“Company Common Stock”), together with the rights (the “Rights”) attached thereto pursuant to that certain Preferred Stock Rights Agreement (the “Rights Agreement”), dated as of August 16, 2001, between the Company and Mellon Investor Services LLC (the “Rights Agent”) (each issued and outstanding share of Company Common Stock and the Rights attached thereto being hereinafter referred to as a “Share” and all issued and outstanding shares of Company Common Stock and the Rights attached thereto being hereinafter referred to collectively as “Shares”) are entering into voting agreements dated as of the date hereof (the “Voting Agreements”).

The parties desire to make certain representations, warranties, covenants and agreements in connection with the Merger and also to prescribe various conditions to the Merger.

AGREEMENT

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

ARTICLE 1.

MERGER

Section 1.1        The Merger .  (a)  Subject to the terms and conditions of this Agreement, at the Effective Time (as defined below), Merger Sub shall be merged upon the terms and subject to the conditions hereof with and into the Company in accordance with the Delaware General Corporation Law, as amended (“DGCL”), whereupon the separate existence of Merger Sub shall cease, and the Company shall be the surviving corporation. The corporation surviving the Merger is sometimes hereinafter referred to as the “Surviving Corporation”.

 

(b)           On the Closing Date, each of the Company and Merger Sub will cause a certificate of merger (the “Certificate of Merger”) to be executed and filed with the Secretary of State of the State of Delaware as provided in Section 251 of the DGCL and will make all other filings or recordings required by the DGCL in connection with the Merger. The Merger shall become effective at such time as the Certificate of Merger is duly filed with the Secretary of State of the State of Delaware or at such later time as is agreed upon by the parties hereto and specified in the Certificate of Merger (the “Effective Time”).

(c)           From and after the Effective Time, the Merger shall have the effects set forth in the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the properties, rights, privileges, powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation, including without limitation, certain severance obligations.

(d)           The closing of the Merger (the “Closing”) shall take place (i) at the offices of the Company, at 10:00 A.M., local time, on the second Business Day after the last of the conditions set forth in Article 8 hereof shall be satisfied or waived in accordance with this Agreement; or (ii) at such other place, time and date as Merger Sub and the Company shall agree. The date on which the Closing occurs is herein referred to as the “Closing Date”.  For purposes of this Agreement, the term “Business Day” means each day that is not a Saturday, Sunday or other day on which banking institutions in the City of New York are not required or authorized by law to be open for business.

Section 1.2        Conversion or Cancellation of Shares .  At the Effective Time, by virtue of the Merger and without any action on the part of Merger Sub or the Company or the holder of any Shares or the holder of any shares of common stock of Merger Sub:

(a)           each Share which is outstanding immediately prior to the Effective Time (including each Share of restricted stock which is represented by a stock certificate issued to the holder of such restricted stock) shall (except as otherwise provided in paragraph (b) of this Section 1.2 or as provided in Section 1.4 hereof with respect to Shares as to which dissenters’ rights have been exercised) be converted into the right to receive $0.20 per Share from the Surviving Corporation, in cash, without interest (the “Merger Consideration”), upon surrender of the certificate formerly representing the Share as provided in Section 1.3;

(b)           each Share owned by Merger Sub or the Company or any other direct or indirect subsidiary of Merger Sub or the Company immediately prior to the Effective Time shall be canceled, and no payment shall be made with respect thereto; and

(c)           each share of common stock of Merger Sub outstanding immediately prior to the Effective Time shall be converted into and become one share of common stock of the Surviving Corporation (the “Surviving Corporation Common Stock”) with the same rights, powers and privileges as the shares so converted.

 

Section 1.3        Surrender and Payment .   (a)  Prior to the Effective Time, Merger Sub shall appoint as agent (the “Exchange Agent”) a commercial bank or trust company, reasonably acceptable to the Company, for the purpose of exchanging certificates representing Shares for the Merger Consideration which holders of such certificates are entitled to receive pursuant to this Article 1.  Immediately prior to the Effective Time, Merger Sub shall deposit in trust with the Exchange Agent, cash or immediately available funds in an aggregate amount equal to the product of: (i) the total number of Shares outstanding immediately prior to the Effective Time (other than the Shares owned by Merger Sub or the Company and any direct or indirect subsidiary of Merger Sub or the Company); multiplied by (ii) the Merger Consideration (such amount being hereinafter referred to as the “Payment Fund”). The Payment Fund shall be invested by the Exchange Agent as directed by Merger Sub (so long as such directions do not impair the rights of the holders of Shares) in Permitted Investments, and any net earnings with respect thereto shall be paid to Merger Sub as and when requested by Merger Sub. The Exchange Agent shall, pursuant to irrevocable instructions, make the payments referred to in Section 1.3(b) out of the Payment Fund. The Payment Fund shall not be used for any other purpose except as provided herein. Promptly after the Effective Time, Merger Sub will send, or will cause the Exchange Agent to send, to each holder of record of Shares which immediately prior to the Effective Time were outstanding, other than holders of Shares canceled and retired pursuant to Section 1.2(b) hereof: (i) a letter of transmittal for use in such exchange (which shall specify that the delivery shall be effected, and risk of loss and title shall pass, only upon proper delivery of the Shares to the Exchange Agent); and (ii) instructions for use in effecting the surrender of Shares for payment therefor (the “Exchange Instructions”).  If for any reason (including losses), the Payment Fund is inadequate to pay the amounts to which the holders of record of Shares which, immediately prior to the Effective Time were outstanding (other than holders of Shares canceled and retired pursuant to Section 1.2(b) hereof), Parent shall take all actions necessary to cause the Surviving Corporation promptly to deposit in trust with the Exchange Agent, additional cash sufficient to make all payments required to be made to the holders of Shares which immediately prior to the Effective Time were outstanding (other than holders of Shares canceled and retired pursuant to Section 1.2(b) hereof) and Parent and the Surviving Corporation shall, in any event, be liable for payment thereof.

(b)           Each holder of Shares that have been converted into a right to receive the Merger Consideration which holders of such Shares are entitled to receive pursuant to this Article 1, upon surrender to the Exchange Agent of the Shares, together with a properly completed and executed letter of transmittal covering such Shares and any other documents reasonably required by the Exchange Instructions, will promptly receive the Merger Consideration payable in respect of such Shares as provided in this Article 1, without any interest thereon, less any required withholding of Taxes, and the certificates so surrendered shall immediately be canceled. Until so surrendered, each Share shall, at and after the Effective Time, represent for all purposes only the right to receive such Merger Consideration except as otherwise provided herein or by applicable law.

(c)           If any certificate has 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 the Surviving Corporation, the posting by such Person of a bond in such reasonable amount as the Surviving Corporation may direct as indemnity against any claim that may be made against it with respect to such certificate, the Exchange Agent shall issue in exchange for such lost, stolen or destroyed certificate the Merger Consideration.

 

(d)           If any portion of the Merger Consideration is to be paid to a Person other than the registered holder of the Shares surrendered in exchange therefor, it shall be a condition to such payment that Shares so surrendered shall be properly endorsed or otherwise be in proper form for transfer and that the Person requesting such payment shall pay to the Exchange Agent any transfer or other Taxes required as a result of such payment to a Person other than the registered holder of such Shares or establish to the satisfaction of the Exchange Agent that such Tax has been paid or is not payable. The Exchange Agent may make any Tax withholdings required by law if not provided with the appropriate documents. For purposes of this Agreement, “Person” means an individual, a corporation, a partnership, a limited liability company, an association, a trust or any other entity or organization, including a government or political subdivision or any agency or instrumentality thereof.

(e)           After the Effective Time the stock transfer books of the Company shall be closed and, thereafter, there shall be no further registration of transfers of Shares. If, after the Effective Time, Shares are presented to the Surviving Corporation, they shall be canceled and exchanged for the Merger Consideration provided for, and in accordance with the procedures set forth, in this Article 1.

(f)           Any portion of the Payment Fund that remains unclaimed by the holders of Shares 180 days after the Effective Time (including, without limitation, all interest and other income received by the Exchange Agent in respect of all funds made available to it) shall be returned to the Surviving Corporation, upon demand, and any such holder of Shares who has not exchanged his or her Shares for the Merger Consideration in accordance with this Section 1.3 prior to that time shall thereafter look only to the Surviving Corporation for payment of the Merger Consideration in respect of Shares (subject to abandoned property, escheat and other similar laws) as general creditors thereof.  If any Shares 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), any such Merger Consideration shall, to the extent permitted by applicable law, become the property of the Surviving Corporation, free and clear of all claims or interest of any Person previously entitled thereto.  Notwithstanding the foregoing, the Surviving Corporation shall not be liable to any holder of Shares for an amount paid to a public official pursuant to applicable abandoned property, escheat or other similar laws.

(g)           Any portion of the Merger Consideration made available to the Exchange Agent pursuant to Section 1.3(a) to pay for Shares for which dissenters’ rights have been perfected shall be returned to the Surviving Corporation, upon demand made no earlier than 180 days after the Effective Time.

(h)           All cash paid upon the surrender for exchange of certificates formerly representing Shares in accordance with the terms of this Article 1 shall be deemed to have been paid in full satisfaction of all rights pertaining to the Shares exchanged for cash theretofore represented by such certificates.

 

Section 1.4        Dissenting Shares .  Notwithstanding anything in this Agreement to the contrary, Shares outstanding immediately prior to the Effective Time and held by a holder who has not voted in favor of the Merger and who has delivered a written demand for appraisal of such Shares in accordance with Section 262 of the DGCL (the “Dissenting Shares”) shall not be converted into the right to receive the Merger Consideration as provided in Section 1.2 hereof, unless and until such holder fails to perfect or effectively withdraws or otherwise loses such holder’s right to appraisal and payment under the DGCL. Such holder shall be entitled to receive payment of the appraised value of such Shares in accordance with the provisions of the DGCL, provided that such holder complies with the provisions of Section 262 of the DGCL.  If, after the Effective Time, any such holder fails to perfect or effectively withdraws or otherwise loses such holder’s right to appraisal, such Dissenting Shares shall thereupon be treated as if they had been converted as of the Effective Time into the right to receive the Merger Consideration, without interest thereon. The Company shall give Merger Sub prompt notice of any demands received by the Company for appraisal of Shares, and, prior to the Effective Time, Merger Sub shall have the right to participate in all negotiations and proceedings with respect to such demands. Prior to the Effective Time, the Company shall not, except with the prior written consent of Merger Sub, make any payment with respect to, or settle or offer to settle, any such demands.

Section 1.5        Stock Options .   (a)  Effective as of the date hereof, each outstanding option to purchase Shares (individually a “Director Option” and collectively “Director Options”) granted under the Medialink Worldwide Incorporated Amended and Restated 1996 Directors Stock Option Plan (the “Director Option Plan”) and each outstanding option to purchase Shares (individually an “Employee Option” and collectively “Employee Options”) granted under the Medialink Worldwide Incorporated Amended and Restated Stock Option Plan as adopted as of January 31, 1996 (the “Employee Option Plan”), whether or not any such Director Options or Employee Options are then exercisable (Director Options and Employee Options being sometimes hereinafter referred to individually as an “Option” and collectively as “Options”), shall be exercisable in full at the price per Share as established for each such Option.  Thereafter, effective immediately prior to the Effective Time, each outstanding and unexercised Option to purchase any Share shall be converted by the Company into the right to receive from the Company, on the Closing Date, in consideration for any such Option, an amount in cash equal to the product of: (i) the number of Shares subject to such Option (other than any portion of such Option which has previously been exercised); and (ii) the excess, if any, of the Merger Consideration over the exercise price per Share in effect with respect to such Option, reduced by the amount of withholding or other Taxes required by law to be withheld with respect to such payment.  Any Option (including tandem stock appreciation rights, if any, granted in connection with such Option) which, as of the Effective Time, has not been exercised and which provides an exercise price for the purchase of a Share which is greater than the amount of the Merger Consideration payable for each Share, shall, at the Effective Time, be cancelled without consideration and the holders of any such Options (including any tandem stock appreciation rights granted in connection with any such Options) shall have no further rights whatsoever under the terms of any such Options.  On the Closing Date, the Surviving Corporation will make the payments required to be made by this Section 1.5(a).  Parent and Merger Sub will deposit or cause to be deposited sufficient funds with the Company at the Closing to make the payments required by this Section 1.5(a).

 

(b)           Any provision under plans, programs or arrangements providing for the issuance or grant of any interest in respect of the capital stock of the Company or any Subsidiary shall terminate as of the Effective Time, and the Company shall ensure that following the Effective Time, no current or former employee or director shall have any Option to purchase Shares or any other equity interest in the Company under the Director Option Plan, Employee Option Plan or any other plans, programs or arrangements providing for the issuance or grant of any other interest in respect of the capital stock of the Company or any Subsidiary.

(c)           Prior to the Effective Time, the Board of Directors of the Company (the “Board of Directors”) (or, if appropriate, any committee administering the Director Option Plan or the Employee Option Plan) shall adopt such resolutions and take such actions as are necessary to carry out the terms of this Section 1.5.

Section 1.6        Warrants .   (a)  Effective as of the Effective Time, each outstanding warrant to purchase Shares (individually a “Warrant” and collectively “Warrants”) listed on Section 1.6 of the Company Disclosure Schedule shall be cancelled and converted into a right to receive an amount of cash equal to the Black Scholes value of the Warrant as determined in accordance with each such Warrant as reduced by the amount of withholding or other Taxes required by law to be withheld with respect to such payment.

(b)           Promptly after the Effective Time, the Surviving Corporation will send to each holder of record of Warrants set forth on Section 1.6 of the Company Disclosure Schedule (i) a letter of transmittal for use in exchanging the Warrants (which shall specify that the delivery shall be effected, and risk of loss and title shall pass, only upon proper delivery of the Warrants to the Surviving Corporation); and (ii) instructions for use in effecting the surrender of the Warrants for payment therefor.

(c)           The Surviving Corporation will make the payments required to be made by this Section 1.6 to each Warrant holder upon receipt from the holder of the Warrant together with a letter of transmittal.  Such payments will be made no later than the later of (i) ten (10) Business Days after the Effective Time and (ii) five (5) Business Days following the receipt of the aforementioned documents.  Parent and Merger Sub will deposit or cause to be deposited sufficient funds with the Company to make the payments required by this Section 1.6.

ARTICLE 2.

THE SURVIVING CORPORATION

Section 2.1        Certificate of Incorporation .  At the Effective Time, and without any further action on the part of the Company or Merger Sub, the certificate of incorporation of the Surviving Corporation shall be amended in its entirety to read as the certificate of incorporation of Merger Sub in effect immediately prior to the Effective Time, except that Article I thereof shall provide that the name of the Corporation shall be “Medialink Worldwide Incorporated.” Such certificate of incorporation, as so amended, shall be the certificate of incorporation of the Surviving Corporation until amended in accordance with applicable law.

 

Section 2.2        By-laws .  At the Effective Time, and without any further action on the part of the Company or Merger Sub, the by-laws of Merger Sub in effect immediately prior to the Effective Time shall become the by-laws of the Surviving Corporation until amended in accordance with applicable law.

Section 2.3        Directors and Officers .  From and after the Effective Time, until successors are duly elected or appointed and qualified in accordance with applicable law or their earlier death, resignation or removal: (a) the directors of Merger Sub at the Effective Time shall become the directors of the Surviving Corporation and (b) the officers of Merger Sub at the Effective Time shall become the officers of the Surviving Corporation.

ARTICLE 3.

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to Parent and Merger Sub that, except as set forth in the disclosure schedule delivered to Merger Sub concurrently with this Agreement, which shall make reference to the particular Section of this Agreement to which such disclosure relates (the “Company Disclosure Schedule”) as of the date hereof:

Section 3.1        Corporate Existence and Power .   (a)  The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated, and is duly qualified to do business and in good standing in each jurisdiction where its ownership or leasing of property or the conduct of its business requires it to be so qualified except for such jurisdictions in which the failure to be so qualified would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect (as defined below) on the Company. The Company has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. The Company is not in default under or in violation of any provision of its certificate of incorporation or by-laws. For purposes of this Agreement, “Material Adverse Effect” or “Material Adverse Change” means with respect to any entity, any change, circumstance, event or effect that is materially adverse to: (i) the business, operations, results of operations or financial condition of such entity and its subsidiaries taken as a whole or (ii) the ability of such entity to timely consummate the transactions contemplated by this Agreement, except, in each case, to the extent such change, circumstance, event or effect is reasonably attributable to: (A) general economic conditions in the United States (including prevailing interest rate and stock market levels) to the extent not disproportionately affecting the applicable Person as compared to other Persons in the same industry; (B) the general state of the industries in which such entity operates to the extent not disproportionately affecting the applicable Person as compared to other Persons in the same industry; (C) the negotiation, announcement, execution, delivery or consummation of the transactions contemplated by this Agreement; or (D) a deterioration in the financial condition of the entity occurring for reasons other than the damage, destruction or loss of ownership of any of its material assets of except when, in the case where the entity is the Company, as a result of the deterioration in the Company’s financial condition: (i) the Company is unable to satisfy the conditions to the obligations of Parent and Merger Sub to consummate the Merger; or (ii) the relationship between the Company and its customers, suppliers and employees (other than the Severance Participants (as hereinafter defined)) is reasonably determined by Parent and the Company to be materially damaged.

 

(b)           The Company has previously made available to Parent or Merger Sub true and complete copies of the certificate of incorporation and by-laws of the Company, as currently in effect.

Section 3.2        Corporate Authorization .  The Company has all necessary corporate power and authority to execute and deliver this Agreement and all agreements and documents contemplated hereby and, subject to approval by the stockholders of the Company as provided for in the following sentence, all necessary corporate power and authority to consummate the Merger and the other transactions contemplated hereby.  Subject only to the approval of this Agreement and the transactions contemplated hereby by the holders of Shares representing at least a majority of all the votes entitled to be cast on the Merger, the consummation by the Company of the transactions contemplated hereby has been duly authorized by all necessary corporate action on the part of the Company. This Agreement has been duly and validly executed and delivered by the Company and constitutes a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except to the extent such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting generally the enforcement of creditors’ rights and by the availability of equitable remedies.

Section 3.3        Governmental Authorization .  The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions (including the Merger) contemplated hereby require no consent, waiver, agreement, approval, permit or authorization of, or declaration, filing, notice or registration to or with, any United States Federal, state, local or foreign governmental, regulatory or administrative authority, agency or commission or any court, tribunal or other body (“Governmental Entity”) other than: (a) the filing of the Certificate of Merger in accordance with the DGCL; (b) compliance with any applicable requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the rules and regulations promulgated thereunder; (c) compliance with the applicable requirements of state securities or “blue sky” laws; (d) such filings, consents, approvals, orders, registrations and declarations as may be required under the laws of any foreign country in which the Company conducts any business or owns any assets; and (e) such other actions, filings, approvals and consents, the failure to make or obtain which would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company.

Section 3.4        Non-Contravention .  The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby do not and will not (with or without notice or lapse of time or both), assuming compliance with the matters referred to in Section 3.3 hereof and subject to Section 7.2 hereof: (a) conflict with or violate any provision of the certificate of incorporation or by-laws of the Company; (b) contravene or conflict with or constitute a violation of any provision of any law, statute, rule, regulation, ordinance, code, judgment, injunction, order or decree binding upon or applicable to the Company; (c) result in a violation or breach of, or constitute a default (or give rise to any right of termination, cancellation or acceleration or any loss of material benefits to the Company) under: (i) any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, license, contract, agreement or other instrument or obligation to which the Company is a party or by which any of the Company’s properties or assets may be bound; or (ii) the terms, conditions or provisions of any permit relating to the operation of the business of the Company; or (d) result in the creation or imposition of any Lien (as defined below) on any asset of the Company, with such exceptions with respect to the matters referred to in clauses (b) through (d) as would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company. For purposes of this Agreement, “Lien” means, with respect to any asset, any mortgage, lien, pledge, claim, security interest or encumbrance of any kind in respect of such asset.

 

Section 3.5        Capital Stock .   (a)  The authorized capital stock of the Company consists of seventeen million seven hundred seventy six thousand fifty seven (17,776,057) shares, fifteen million (15,000,000) of which shares are shares of common stock, par value $.01 per share and two million seven hundred seventy six thousand fifty seven (2,776,057) of which shares are preferred stock.  As of June 30, 2009, there were: (i) 6,428,059 Shares outstanding; (ii) an aggregate of  430,000 Shares reserved for issuance upon exercise of outstanding Director Options under the terms of the Director Option Plan; (iii) an aggregate of 2,270,808 Shares reserved for issuance upon exercise of outstanding Employee Options under the terms of the Employee Option Plan; and (iv) an aggregate of 2,229,020 Shares reserved for issuance upon exercise of the Warrants (as defined in Section 1.6) and conversion of certain debentures. Section 3.5 of the Company Disclosure Schedule sets forth a list of the names of the holders and the exercise prices and number of Shares which may be acquired for all outstanding Options which have an exercise price lower than the Merger Consideration, to the extent not exercised as of the date hereof.  Other than the Options (as defined in Section 1.5) and the Warrants the Company has no outstanding bonds, debentures, notes or other obligations the holders of which have the right to vote (or which are convertible into or exercisable for securities having the right to vote) with the stockholders of the Company on any matter.

(b)           All outstanding Shares have been duly authorized and validly issued and are fully paid, non-assessable and free of preemptive rights.  Except as set forth in paragraph (a) of this Section 3.5, no Stock Rights (as defined below) are authorized, issued or outstanding with respect to the capital stock of the Company. Except as set forth in paragraph (a) of this Section 3.5 and except for changes since June 30, 2009 resulting from the exercise of Options outstanding on such date, there are: (x) no shares of capital stock or other voting securities of the Company; (y) no securities of the Company convertible into or exchangeable for shares of capital stock or voting securities of the Company; and (z) no options or other rights to acquire from the Company, and no obligation of the Company to issue, any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities (or cash or other property in lieu of such stock or securities) of the Company (the items in clauses (x), (y) and (z) being referred to collectively as the “Company Securities”).  There are no outstanding obligations of the Company to repurchase, redeem or otherwise acquire any Company Securities other than as set forth in Section 1.5 hereof.  For purposes of this Agreement, “Stock Rights” mean (i) subscriptions, calls, warrants, options, rights and other arrangements or commitments of any kind which obligate an entity to issue or dispose of any of its capital stock or other equity securities, (ii) securities convertible into or exercisable or exchangeable for shares of capital stock or other equity securities, and (iii) stock appreciation rights, performance units and other similar stock based rights whether they obligate the issuer thereof to issue stock or other securities or to pay cash.

 

(c)           The Company is not a party to any stockholder agreements, voting trusts, proxies or other agreements or understandings with respect to or concerning the purchase, sale or voting of the capital stock of the Company.

Section 3.6        Subsidiaries .  Section 3.6 of the Company Disclosure Schedule lists each corporation, limited liability company or other entity in which, at any time during the period beginning January 1, 2008 and ending on the date hereof, more than fifty percent (50%) of the issued and outstanding voting capital stock or other equity interests was directly or indirectly owned by the Company (each such corporation, limited liability company or other entity being hereinafter a “Subsidiary” and collectively “Subsidiaries”).  As of the date hereof, the Company has no Subsidiaries.

Section 3.7        SEC Filings .   (a)  Since January 1, 2006, the Company has timely filed (taking into account applicable extensions) with the U.S. Securities and Exchange Commission (the “SEC”) all forms, reports, statements, schedules and other documents required to be filed by the Company pursuant to the federal securities laws (the “Company SEC Filings”).  As of their respective dates, the Company SEC Filings:  (i) complied in all material respects with all applicable requirements of the Securities Act of 1933, as amended (the “Securities Act”), the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”), as applicable; and (ii) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not false or misleading.  Each of the Company SEC Filings which is filed subsequent to the date of this Agreement and prior to the Effective Time will comply, in all material respects, with the Securities Act, the Exchange Act and the Sarbanes-Oxley Act and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not false or misleading.  To the Company’s knowledge, there has been no event, development, or circumstance which would cause the Company to be required to amend any of the Company SEC Filings pursuant to the federal securities laws.  The Company is in compliance with the provisions of the Sarbanes-Oxley Act and the rules and regulations thereunder, including Section 404 thereof, and the certifications provided and to be provided pursuant to Sections 302 and 906 thereof are accurate.

(b)           The Company has previously delivered or made available to Parent or Merger Sub, copies of all comment letters received by the Company from the SEC since December 31, 2006 relating to the Company SEC Filings together with all written responses of the Company thereto.  To the Company’s knowledge, there are no outstanding or unresolved comments in any such comment letters received by the Company from the SEC.  To the Company’s knowledge, none of the Company SEC Filings is the subject of any ongoing review by the SEC.  The Company has previously delivered or made available to the Parent or Merger Sub: (i) its annual report on Form 10-K for the fiscal year ended December 31, 2008; and (ii) all of its other forms, reports, statements, schedules and other documents filed with the SEC under the Exchange Act since December 31, 2008 (the items described in clauses (i) and (ii) are collectively referred to as the “Recent Filings”).

 

(c)           The records, systems, controls, data and information of the Company are recorded, stored, maintained and operated under means that are under the license or exclusive ownership and direct control of the Company or its accountants, except for any non-license, non-exclusive ownership or non-direct control that would not reasonably be expected to have a Material Adverse Effect on the system of internal accounting controls described in the following sentence.  The Company has devised and maintains a system of internal accounting controls sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with United States generally accepted accounting principles, consistently applied throughout the periods covered thereby (“GAAP”), including that: (i) transactions are executed only in accordance with management’s authorization; (ii) transactions are recorded as necessary to permit preparation of the financial statements of the Company and to maintain accountability for the assets of the Company; (3) access to such assets is permitted only in accordance with management’s authorization; (4) the reporting of such assets is compared with existing assets at regular intervals; and (5) accounts, notes and other receivables and inventory are recorded accurately, and proper and adequate procedures are implemented to effect the collection thereof on a current and timely basis (“Internal Controls”).  The Company (x) has designed disclosure controls and procedures (within the meaning of Rules 13a-15(e) and 15d-15(e) of the Exchange Act) to ensure that material information relating to the Company is made known to the management of the Company by others within the Company as appropriate to allow timely decisions regarding required disclosure and to make the certifications required by the Exchange Act with respect to the Company SEC Filings, and (y) has disclosed, based on its most recent evaluation as of December 31, 2008, to its auditors and the audit committee of its Board of Directors (A) any significant deficiencies in the design or operation of Internal Controls which could adversely affect its ability to record, process, summarize and report financial data and have disclosed to its auditors any material weaknesses in Internal Controls and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in its Internal Controls.  The Company has made available to Parent, true, correct and complete copies of the Audit Committee minutes and materials distributed to the Audit Committee in connection therewith for the period December 31, 2007 through the date of this Agreement.

Section 3.8        Financial Statements .  The audited consolidated financial statements and unaudited consolidated interim financial statements of the Company and its Subsidiaries included in the Recent Filings (the “Financial Statements”) or incorporated by reference: (a) comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto; (b) have been prepared in accordance with GAAP; and (c) fairly present, in all material respects, in conformity with GAAP, the consolidated financial position of the Company and its Subsidiaries as of the dates thereof, and the Company’s consolidated results of operations, stockholders’ equity and cash flows for the periods then ended (except (x) in the case of unaudited interim statements, pro forma financial information, normal year-end adjustments and the absence of notes and (y) as otherwise indicated in such Financial Statements and the notes thereto).

 

Section 3.9        Undisclosed Liabilities .  Except as set forth in the Financial Statements, the Company has no material liabilities or obligations (whether accrued, contingent or otherwise) which would be required to be reflected on a balance sheet or in the notes thereto, prepared in accordance with GAAP, and there is no existing condition, situation or set of circumstances that, in the Company’s judgment, is likely to result in any such liabilities or obligations except for liabilities and obligations: (a) incurred in the ordinary course of business consistent with past practice since December 31, 2008; or (b) which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company.

Section 3.10      Information in Disclosure Documents .  None of the information supplied by the Company for inclusion or incorporation by reference in: (a) the proxy or information statement of the Company (the “Proxy Statement”) to be filed with the SEC in connection with the Merger, and any amendments or supplements to any thereof; or (b) any other document filed or to be filed with the SEC or any other Governmental Entity in connection with the transactions contemplated by this Agreement (the “Other Filings”) (excluding any information supplied in writing by Parent or Merger Sub specifically for inclusion therein) will, at the respective times filed with the SEC or any other Governmental Entity and, in addition, in the case of the Proxy Statement, at the date that it or any amendment of supplement is mailed to the stockholders of the Company in connection with the meeting of the stockholders of the Company (the “Meeting”) required to approve the Merger and at the time of the Meeting contain any untrue statement of a material fact, or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not false or misleading, and shall comply, in all material respects as to form, with all requirements of the Securities Act and the Exchange Act, as applicable.

Section 3.11      Absence of Certain Changes .  Except as disclosed in the Recent Filings or as contemplated by this Agreement: (a) the Company has conducted its business in the ordinary course, consistent with its past practices; (b) there has not been any event or occurrence that has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company; and (c) there has not been any action, nor any authorization, commitment or agreement by the Company with respect to any action that, if taken after the date hereof would be prohibited by the provisions of Section 5.1 hereof.

Section 3.12      Litigation .  Except as disclosed in the Recent Filings, there is no suit, action or proceeding (or any investigation of which the Company is aware) pending against (or, to the knowledge of the Company, threatened against or affecting) the Company that: (a) would, individually or in the aggregate, be  likely to have a Material Adverse Effect on the Company; or (b) challenges the validity or propriety of, or seeks to prevent or materially delay the consummation of the Merger or any of the other transactions contemplated by this Agreement.  In addition, except as disclosed in the Recent Filings, there is no judgment, decree, injunction, rule or order of any Governmental Entity or arbitrator outstanding against the Company that would, individually or in the aggregate, be likely to have a Material Adverse Effect on the Company.

 

Section 3.13      Taxes .   (a)(i) All material Tax returns and reports (including information returns and reports and any schedules or attachments thereto) and amended or substituted returns and reports required to be filed with any Taxing Authority (as defined below) prior to the Effective Time by or on behalf of the Company or any Subsidiary (collectively, the “Returns”), have been or will be filed when due in accordance with all applicable laws (including any extensions of such due date); (ii) all Returns were (and, as to any Returns not filed as of the date hereof, will be) correct and complete in all material respects and were (and, as to any Returns not filed as of the date hereof, will be) prepared in substantial compliance with all applicable laws and regulations; (iii) all Taxes due and payable by the Company or any of its Subsidiaries have been timely paid, withheld or adequately provided for on the Financial Statements; (iv) the Company has and its Subsidiaries have made or will have made all required estimated Tax payments due on or before the Effective Time; (v) the charges, accruals and reserves for deferred Taxes reflected on the Financial Statements of the Company and its Subsidiaries are adequate to cover such Taxes; (vi) neither the Company nor any of its Subsidiaries is delinquent in the payment of any Tax or has requested any extension of time within which to file or send any Return, which Return has not since been filed or sent; (vii) neither the Company nor any of its Subsidiaries has granted any extension or waiver of the limitation period applicable to any Returns; (viii) to the Company’s knowledge, there are no pending or threatened claims against or with respect to the Company or any of its Subsidiaries in respect of any Tax or assessment; (ix) there are no Liens for Taxes upon any of the assets of the Company or any of its Subsidiaries, except Liens for current Taxes not yet due; (x) neither the Company nor any of its Subsidiaries has been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Internal Revenue Code of 1986, as amended (“Code”), during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code; (xi) neither the Company nor any of its Subsidiaries (A) has been a member of an affiliated group of corporations filing a consolidated, combined or unitary Return (other than a group the common parent of which was the Company) or (B) has any liability for the Taxes of any Person (other than the Company or any of its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise; (xii) neither the Company nor any of its Subsidiaries has participated in a “reportable transaction” within the meaning of Treasury Regulation Section 1.6011-4(b); and (xiii) within the past two years, or otherwise as part of a “plan (or series of related transactions)” within the meaning of Section 355(e) of the Code, neither the Company nor any of its Subsidiaries has distributed stock of another Person, or has had its stock distributed by another Person, in a transaction that was purported or intended to be governed in whole or in part by Sections 355 or 361 of the Code.

(b)           For the purposes of this Agreement, “Tax” (and, with correlative meaning, “Taxes” and “Taxable”) means: (i) all taxes of any kind, including but not limited to those on or measured by or referred to as income, alternative or add-on minimum tax,  gross receipts, sales, use, ad valorem, franchise, profits, license, withholding on amounts paid to or by the Company or any of its Subsidiaries, payroll, employment, excise, severance, stamp, occupation, premium, value added, property, environmental or windfall profit tax, custom, duty or other tax, governmental fee or other similar assessment or charge of any kind whatsoever, together with any interest or any penalty, addition to tax or additional amount imposed by any governmental authority, domestic or foreign, (a “Taxing Authority”) responsible for the imposition of any such tax; and (ii) liability of the Company or any of its Subsidiaries for the payment of any amounts of the type described in clause (i) of this paragraph (b) as a result of being a member of an affiliated, consolidated, combined or unitary group for any Taxable period.

 

Section 3.14      ERISA and Employment Matters .   (a)  Section 3.14(a)(i) of the Company Disclosure Schedule sets forth a list of all material Plans.  “Plans” shall mean all “employee pension benefit plans” (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) (each, a “Pension Plan”), all “employee welfare benefit plans” (as defined in Section 3(l) of ERISA) (each, a “Welfare Plan”), all bonus, deferred compensation, incentive compensation, excess benefit, stock, stock option, severance, termination pay, change in control compensation, death benefit and fringe benefit plans, and all material employment agreements maintained, sponsored, administered or contributed to by the Company or any of its Subsidiaries or with respect to which the Company or any of its Subsidiaries has any liability for the benefit of any current or former employee or other beneficiary, except in each case for any plan or agreement required to be provided pursuant to any federal, state, local or foreign law or regulation.  No Plan is or at any time within the six calendar years preceding the date of this Agreement has been a “multiemployer plan” within the meaning of Section 3(37) of ERISA which is subject to Title IV of ERISA or a plan that has two or more contributing sponsors at least one of which is not under common control, within the meaning of Section 4063 of ERISA.  Section 3.14(a)(iii) of the Company Disclosure Schedule sets forth all material collective bargaining agreements covering employees of the Company.

(b)           With respect to each Plan (to the extent applicable), the Company has provided or made available or will provide or make available prior to the consummation of the Merger, to Merger Sub, true and complete copies of: (i) the current Plan documents, including all amendments and summary plan descriptions; (ii) each trust agreement relating to such Plan; (iii) the most recent annual report (Form 5500 Series) required to be filed with the IRS; (iv) the most recent actuarial report or valuation; and (v) the most recent determination letter issued by the IRS.

(c)           All Plans have been established and administered in all material respects in compliance with their terms and with the requirements of any applicable law, including, but not limited to ERISA and the Code.

 

(d)           No Pension Plan subject to Title IV of ERISA for which the Company or a Subsidiary of the Company was the contributing sponsor was terminated within six years prior to the date hereof, or was terminated more than six years prior to the date hereof unless the Company has no material contingent or actual liability with respect to such Plan as of the date hereof (other than in a standard termination pursuant to Section 4041 of ERISA). With respect to each Pension Plan that is subject to Title IV or Section 302 of ERISA or Section 412 or 4971 of the Code: (i) there does not exist any accumulated funding deficiency within the meaning of Section 412 of the Code or Section 302 of ERISA; (ii) the fair market value of the assets of such Plan equals or exceeds the actuarial present value of all accrued benefits under such Plan; and (iii) no liability (other than for premiums to the PBGC) under Title IV of ERISA has been or is expected to be incurred by the Company or any of its Subsidiaries.  Neither the Company nor any of its Subsidiaries has engaged in a transaction that may give rise to liability under Sections 4064 or 4069 of ERISA. Neither the Company nor any Subsidiary is subject to any Lien imposed under Section 412(n) of the Code or Section 302(f) of ERISA, whichever may apply, with respect to any Pension Plan. Neither the Company nor any Subsidiary has any material liability for unpaid contributions with respect to any Pension Plan. Neither the Company nor any Subsidiary is required to provide security to a Pension Plan which covers or has covered employees or former employees of the Company or any of its Subsidiaries under Section 401(a) (29) of the Code. Each Pension Plan and each related trust agreement, annuity contract or other funding instrument which covers or has covered employees or former employees of the Company or any of its Subsidiaries and is intended to be qualified and Tax-exempt under the provisions of Code Sections 401(a) and 501(a) has received a determination letter that it is so qualified and the Company has no knowledge of any facts which would adversely affect its qualified status.  The Company and its Subsidiaries have paid all premiums (and interest charges and penalties for late payment, if applicable) due the PBGC with respect to each Pension Plan for each plan year thereof for which such premiums are required. There has been no “reportable event” (as defined in Section 4043(b) of ERISA and the PBGC regulations under such Section) with respect to any Pension Plan, and the consummation of the transactions contemplated by this Agreement will not result in the occurrence of any such reportable event. No filing has been made by the Company or any Subsidiary with the PBGC, and no proceeding has been commenced by the PBGC, to terminate any Pension Plan. No condition exists and no event has occurred that could constitute grounds for the termination of, or the appointment of a trustee to administer, any Pension Plan by the PBGC. With respect to any “multiemployer plan” (as defined in Section 3(37) or 4001(a) (1) of ERISA) to which the Company or any Subsidiary contributes or with respect thereto has any liability and which is subject to Title IV of ERISA, no event has occurred in connection with which the Company or any Subsidiary could have any material liability.

(e)           Neither the Company nor any of its Subsidiaries, nor, to the knowledge of the Company, any trustee or administrator of any Plan, has engaged in a “prohibited transaction” as defined in Section 4975 of the Code, or a transaction prohibited by Section 406 of ERISA that could give rise to any material Tax or penalty under Section 4975.

(f)           At the end of its most recent plan year, each Plan to which Section 412 of the Code or Section 302 of ERISA is applicable satisfied the minimum funding standards provided for in such Section and all required installments (within the meaning of Section 412(m) of the Code or Section 302(e) of ERISA), the due date for which is after the end of the most recent plan year but prior to the date hereof, have been made.

(g)           Each Welfare Plan which covers or has covered employees or former employees of the Company or any of its Subsidiaries and which is a “group health plan” as defined in Section 607(1) of ERISA, has been operated in compliance in all material respects with provisions of Part 6 of Title I, Subtitle B of ERISA and Sections 162(k) and 4980B of the Code at all times.  To the knowledge of the Company, no circumstances exist that could result in, any material liability to the Company or any of its Subsidiaries as a result of a failure to comply with the continuation coverage requirements of Section 601 et seq. of ERISA and Section 4980B of the Code.

 

(h)           With respect to any plan covering employees or former employees of any Subsidiary organized under the laws of or doing business in any country other than the United States which if maintained or administered in or otherwise subject to the laws of the United States would be an “employee pension benefit plan” as defined in Section 3(2) of ERISA (except for any such plan providing for benefits which are required pursuant to any foreign law or regulation), to the knowledge of the Company, each such plan has been maintained in all material respects in compliance with its terms and with the requirements prescribed by any and all applicable statutes, orders, rules and regulations (including without limitation any special provisions relating to the Tax status of contributions to, earnings of or distributions from such plans where each such plan was intended to have such Tax status) and has been maintained in good standing with applicable regulatory authorities.

(i)           Except for the Option Plans and those certain employment agreements listed on Section 3.14(a)(i) of the Company Disclosure Schedule, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (either alone or in conjunction with any other event) result in, cause the accelerated vesting, funding or delivery of, or increase the amount or value of, any payment or benefit to any employee, officer or director of the Company or any of its Subsidiaries, or result in any limitation on the right of the Company or any of its Subsidiaries to amend, merge, terminate or receive a reversion of assets from any Plan or related trust.  As of the date hereof, the Company has provided to Parent, with respect to each individual who may be a “disqualified individual” for purposes of Section 280G of the Code, information sufficient such that Parent may calculate the amount of any “parachute payments” (within the meaning of Section 280G of the Code) that will be payable in connection with the Merger (alone or in conjunction with any other events).

(j)           Except as is not reasonably likely to result in material liability to the Company or material liability to any employee of the Company, each Plan which is a “non-qualified deferred compensation plan” (as such term is defined in Section 409A of the Code) has, at al