TABLE OF CONTENTS

 

		Page
ARTICLE I
DEFINITIONS
Section 1.1	Certain Defined Terms	5
Section 1.2	Table of Other Defined Terms	8
Section 1.3	Interpretations	10
ARTICLE II
THE MERGER
Section 2.1	The Merger	10
Section 2.2	Closing	10
Section 2.3	Effective Time	11
Section 2.4	Effects of the Merger	11
Section 2.5	Certificate of Incorporation; Bylaws	11
Section 2.6	Directors	11
Section 2.7	Officers	11
ARTICLE III
EFFECT ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
Section 3.1	Conversion of Capital Stock	12
Section 3.2	Treatment of Options and Other Equity-Based Awards	12
Section 3.3	Exchange and Payment	13
Section 3.4	Withholding Rights	15
Section 3.5	Dissenting Shares	15
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 4.1	Organization, Standing and Power	15
Section 4.2	Authority	16
Section 4.3	No Conflict; Consents and Approvals	16
Section 4.4	Capitalization	17
Section 4.5	SEC Reports; Financial Statements	18
Section 4.6	Company Information	18
Section 4.7	Absence of Certain Changes or Events	18
Section 4.8	Litigation	19
Section 4.9	Compliance with Laws; Permits	19
Section 4.10	Benefit Plans	19
Section 4.11	Labor Matters	21
Section 4.12	Environmental Matters	21

 

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Section 4.13	Taxes	22
Section 4.14	Material Contracts	24
Section 4.15	Government Contracts	24
Section 4.16	Insurance	25
Section 4.17	Properties and Assets	26
Section 4.18	Intellectual Property	26
Section 4.19	State Takeover Statutes	27
Section 4.20	Opinion of Financial Advisor	27
Section 4.21	Brokers	27
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
PARENT AND MERGER SUB
Section 5.1	Organization, Standing and Power	27
Section 5.2	Authority	28
Section 5.3	No Conflict; Consents and Approvals	28
Section 5.4	Parent Information	29
Section 5.5	Litigation	29
Section 5.6	Ownership and Operations of Merger Sub	29
Section 5.7	Financing	29
Section 5.8	Approval Required	29
Section 5.9	Ownership of Shares	30
ARTICLE VI
COVENANTS
Section 6.1	Conduct of Business of the Company	30
Section 6.2	Conduct of Business of Parent and Merger Sub Pending the Merger	32
Section 6.3	No Control of Other Party’s Business	32
Section 6.4	Acquisition Proposals	33
Section 6.5	Additional SEC Reports	35
Section 6.6	Preparation of Proxy Statement; Company Stockholders’ Meeting	35
Section 6.7	Access to Information; Confidentiality	37
Section 6.8	Further Action; Efforts	37
Section 6.9	Employment and Employee Benefits Matters; Other Plans	39
Section 6.10	Takeover Laws	41
Section 6.11	Notification of Certain Matters	41
Section 6.12	Indemnification, Exculpation and Insurance	42
Section 6.13	Rule 16b-3	43
Section 6.14	Public Announcements	43
Section 6.15	Non-Solicitation of Employees	43
Section 6.16	Obligations of Parent and Merger Sub	44
Section 6.17	Stockholder Litigation	44
Section 6.18	Closing Cash and Related Matters	44
Section 6.19	Title Policies	44

 

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ARTICLE VII
CONDITIONS PRECEDENT
Section 7.1	Conditions to Each Party’s Obligation to Effect the Merger	44
Section 7.2	Conditions to the Obligations of the Company	45
Section 7.3	Conditions to the Obligations of Parent and Merger Sub	45
Section 7.4	Frustration of Closing Conditions	47
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.1	Termination	47
Section 8.2	Effect of Termination	48
Section 8.3	Fees and Expenses	48
Section 8.4	Frustration of Conditions	49
ARTICLE IX
GENERAL PROVISIONS
Section 9.1	Nonsurvival of Representations and Warranties	50
Section 9.2	Disclosure	50
Section 9.3	Notices	50
Section 9.4	Entire Agreement	51
Section 9.5	Parties in Interest	51
Section 9.6	Amendment or Supplement	52
Section 9.7	Extension of Time; Waiver	52
Section 9.8	Governing Law	52
Section 9.9	Submission to Jurisdiction	52
Section 9.10	Assignment; Successors	53
Section 9.11	Enforcement	53
Section 9.12	Severability	53
Section 9.13	Waiver of Jury Trial	53
Section 9.14	Counterparts	54
Section 9.15	Facsimile or PDF Signature	54
Section 9.16	No Presumption Against Drafting Party	54

 

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AGREEMENT AND PLAN OF MERGER

 

THIS AGREEMENT AND PLAN OF MERGER (this “ Agreement ”), is dated as of September 16, 2009, by and among Chemring Group PLC, a company organized under the laws of England and Wales (“ Parent ”), Parkway Merger Sub, Inc., a Delaware corporation and a wholly-owned Subsidiary of Parent (“ Merger Sub ”) and Hi-Shear Technology Corporation, a Delaware corporation (the “ Company ”).

 

RECITALS

 

A.            Parent, Merger Sub and the Company intend to effect a merger of Merger Sub with and into the Company in accordance with this Agreement and the General Corporation Law of the State of Delaware (“ DGCL ”), with the Company surviving as a wholly-owned subsidiary of Parent (the “ Merger ”).

 

B.            The board of directors of the Company (the “ Company Board ”) has unanimously (i) determined that this Agreement, the Merger and the other transactions contemplated by this Agreement are advisable, fair to and in the best interests of the Company and its stockholders, (ii) adopted and approved the execution, delivery and performance of this Agreement, and the consummation of the transactions contemplated hereby in accordance with the DGCL upon the terms and conditions contained herein, and (iii) resolved to recommend approval of the Merger by the stockholders of the Company (the “ Company Stockholders ”).

 

C.            The Boards of Directors of Parent and Merger Sub have each determined that it is in the best interests of their respective stockholders for Parent to acquire the Company on the terms and subject to the conditions set forth herein.

 

D.            Parent, Merger Sub and the Company desire to make certain representations, warranties, covenants and agreements in connection with the Merger and also to prescribe certain conditions to the Merger as specified herein.

 

E.            Concurrently with the execution and delivery of this Agreement, and as a material condition and inducement to Parent’s and Merger Sub’s willingness to enter into this Agreement, one of the Company Stockholders is entering into an agreement substantially in the form attached hereto as Exhibit A with Parent and Merger Sub, whereby, among other things, such Company Stockholder has agreed to vote certain Shares in favor of this Agreement and the Merger, on the terms and subject to the conditions set forth therein.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the premises, and of the representations, warranties, covenants and agreements contained herein, and intending to be legally bound hereby, Parent, Merger Sub and the Company hereby agree as follows:

 

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ARTICLE I
DEFINITIONS

 

Section 1.1                                       Certain Defined Terms .   For purposes of this Agreement:

 

“ Action ” means any claim, action, suit, arbitration, investigation or proceeding by or before any Governmental Authority.

 

“ Affiliate ” means, with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person.  For purposes of the immediately preceding sentence, the term “ control ” (including the terms “ controlling ,” “ controlled by ” and “ under common control with ,” with their respective correlative meanings), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities, as trustee or executor, as general partner or managing member, by contract or otherwise.

 

“ Antitrust Law ” means the Sherman Act, as amended, the Clayton Act, as amended, the HSR Act, the Federal Trade Commission Act, as amended, and Foreign Antitrust Laws.

 

“ Business Day ” means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by Law to be closed in New York, New York.

 

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

 

“ Company Common Stock ” means the common stock, par value $.001 per share, of the Company.

 

“ Company Equity Plans ” means the Company’s 1993 Stock Option Plan, the Company’s 2006 Stock Award Plan and any other employee or director stock option, stock purchase or equity compensation plan, arrangement or agreement of the Company.

 

“ Contract ” means any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, or other instrument, obligation or binding understanding or arrangement, in each case, whether written or oral.

 

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

“ GAAP ” means United States generally accepted accounting principles, as in effect on the date hereof.

 

“ Governmental Authority ” means any federal, state, local or foreign governmental, regulatory or administrative authority, agency, body or commission or any judicial or arbitral body.

 

“ HSR Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

 

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“ Intellectual Property ” means (i) trade names, trademarks and service marks, domain names, trade dress and similar rights (whether or not registered), and applications to register any of the foregoing and any goodwill associated with the foregoing; (ii) patents and patent applications; (iii) copyrights (whether registered or unregistered) and applications for registration, schematics, industrial models and inventions; (iv) know-how and trade secrets; (v) databases and data collections; and (vi) confidential or proprietary information.

 

“ IRS ” means the Internal Revenue Service of the United States.

 

“ Knowledge ” means the knowledge of the persons listed in Schedule 1.1(a) , as of the date of this Agreement (or, with respect to a certificate delivered pursuant to this Agreement, as of the date of delivery of such certificate).

 

“ Law ” means any statute, law, ordinance, regulation, rule, code, injunction, judgment, decree or order of any Governmental Authority, including any published judicial or administrative interpretation thereof.

 

“ Leased Real Property ” means the real property leased by the Company, as tenant, together with, to the extent leased by the Company, all buildings and other structures, facilities or improvements located thereon and all easements, licenses, rights and appurtenances of the Company relating to the foregoing.

 

“ Liabilities ” means any losses, obligations, liabilities, indebtedness, duties, claims, damages or expenses of any nature whatsoever, including the transaction fees relating to the consummation of the transactions contemplated by this Agreement, whether accrued or fixed, absolute or contingent, matured or unmatured or determined or determinable.

 

“ Lien ” means any security interest, lien, claim, pledge, deed of trust, mortgage, limitation in voting rights, charge, encumbrance or other restriction of any kind (other than those created under applicable securities laws).  A Person shall be deemed to own subject to a Lien any property or asset that it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such property or asset.

 

“ Material Adverse Effect ” means any event, change, circumstance, effect or state of facts, individually or in the aggregate, that is or would reasonably be expected to be materially adverse to, or has had or would reasonably be expected to have a material adverse effect on: (i) the business, condition (financial or otherwise), or results of operations of the Company or (ii) the ability of the Company to timely perform, in all material respects, its obligations under this Agreement or to consummate the transactions contemplated hereby; provided, however, that “Material Adverse Effect” shall not include the effect of any circumstance, change, development, event or state of facts to the extent arising out of or attributable to any of the following, either alone or in combination: (A) the industry and markets in which the Company operates generally (to the extent the Company is not materially disproportionately affected thereby), (B) general economic or political conditions (including those affecting the securities markets) (to the extent the Company is not materially disproportionately affected thereby), (C) the public announcement or pendency of this Agreement or the consummation of the transactions contemplated hereby (including any loss of customers or employees or any labor disputes, employee strikes,

 

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slowdowns, job actions or work stoppages or labor union activities),  (D) the failure of the Company to meet projections of earnings, revenues or other financial measures (whether such projections were made by the Company or independent Third Parties), in and of itself, (E) any change in the Company’s stock price or trading volume, in and of itself, (F) any litigation arising from the negotiation, execution, announcement or pendency of this Agreement or the consummation of the transactions contemplated hereby (including litigation against the Company or any of its officers or directors alleging breach of their fiduciary duties), (G) acts of war (whether or not declared), sabotage or terrorism, military actions or the escalation thereof or other force majeure events (such as natural disasters, acts of God or other events not within the reasonable control of the Company) occurring after the date hereof (to the extent the Company is not materially disproportionately affected thereby), (H) any changes in applicable laws, regulations or accounting rules (to the extent the Company is not materially disproportionately affected thereby), or (I) the taking of any action contemplated by this Agreement or consented to by Parent or Merger Sub.

 

“ Merger Consideration ” means an amount equal to (i) the product of (x) the Per Share Merger Consideration and (y) the aggregate number of Shares issued and outstanding at the Effective Time plus (ii) the amount payable with respect to all outstanding Company Stock Options and Company RSUs.

 

“ Parent Material Adverse Effect ” means any event, change, occurrence effect or state of facts that would prevent, materially delay or materially impede the performance by Parent or Merger Sub of its obligations under this Agreement or the consummation of the transactions contemplated hereby.

 

“ Per Share Merger Consideration ” means an amount equal to $19.18 per Share.

 

“ Permitted Lien ” means (i) statutory liens securing payments not yet due or delinquent (or which may be paid without interest or penalties) or the validity or amount of which is being contested in good faith by appropriate proceedings, (ii) mechanics’, carriers’, workers’, repairers’ and other similar liens arising or incurred in the ordinary course of business relating to obligations as to which there is no default on the part of the Company for a period greater than sixty (60) days, or the validity or amount of which is being contested in good faith by appropriate proceedings, (iii) pledges, deposits or other liens securing the performance of bids, tenders, trade contracts, leases, statutory obligations (including workers’ compensation, unemployment insurance or other social security legislation), surety, customs and appeal bonds or other obligations of like nature, incurred in the ordinary course of business, (iv) zoning, entitlement, conservation restriction and other land use and environmental regulations by Governmental Authorities, and (v)  all exceptions, restrictions, easements, imperfections of title, charges, rights-of-way and other similar encumbrances that do not materially detract from the value or interfere with the present use of the assets of the Company.

 

“ Person ” means an individual, corporation, partnership, limited liability company, limited liability partnership, syndicate, person, trust, association, organization or other entity, including any Governmental Authority, and including any successor, by merger or otherwise, of any of the foregoing.

 

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“ Return ” means any return, declaration, report, statement, information statement and other document required to be filed with respect to Taxes.

 

“ SEC ” means the United States Securities and Exchange Commission.

 

“ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“ Shares ” means the shares of Company Common Stock.

 

“ Subsidiary ” of any Person means any other Person of which at least fifty percent (50%) of the outstanding voting securities or other voting equity interests are owned, directly or indirectly, by such first Person.

 

“ Taxes ” means any and all taxes, charges, fees, duties, levies and assessments of any kind (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any Governmental Authority.

 

“ Third Party ” means any Person or group other than the Parent, Merger Sub and their Affiliates.

 

Section 1.2                                       Table of Other Defined Terms .  The following terms have the meanings set forth in the Sections referenced below:

 

Acquisition Proposal		6.4(f)(i)
Adverse Recommendation Change		6.4(b)
Agreement		Preamble
Appropriate Consultation		6.4(a)
Bid		4.15(a)
Book-Entry Shares		3.3(b)
CAA		4.12(c)(i)
CERCLA		4.12(c)(i)
Certificate of Merger		2.3
Certificates		3.3(b)
CFIUS		6.8(e)
Closing		2.2
Closing Date		2.2
Company		Preamble
Company Board		Recitals
Company Board Recommendation		6.4(b)
Company Bylaws		4.1(b)
Company Charter		4.1(b)
Company Disclosure Schedule		Article IV
Company Employee		6.9(a)
Company Financial Statements		4.5(b)
Company Government Contract		4.15(a)
Company Government Subcontract		4.15(a)
Company Plans		4.10(a)

 

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Company Registered IP		4.18(a)
Company RSU		3.2(b)
Company SEC Reports		4.5(a)
Company Stock Option		3.2(a)
Company Stockholder Approval		4.2
Company Stockholders		Recitals
Company Stockholders’ Meeting		6.6(e)
Confidentiality Agreement		6.7(c)
Costs		6.12(a)
CWA		4.12(c)(i)
Designated Superior Proposal		6.4(b)(A)
DGCL		Recitals
Dissenting Shares		3.5
DOJ		6.8(b)
Effective Time		2.3
Environmental Laws		4.12(c)(i)
Environmental Permits		4.12(c)(ii)
EPCRA		4.12(c)(i)
ERISA		4.10(a)
Exon-Florio		4.3(b)
Foreign Antitrust Laws		4.3(b)
FTC		6.8(b)
Hazardous Materials		4.12(c)(iii)
HMTA		4.12(c)(i)
Indemnified Liabilities		6.12(a)
Indemnified Parties		6.12(a)
ITAR		4.3(b)
Material Contract		4.14(a)
Merger		Recitals
Merger Sub		Preamble
Nonqualified Deferred Compensation Plan		4.10(c)(viii)
Notice of Designated Superior Proposal		6.4(b)(A)
OPA		4.12(c)(i)
OSHA		4.12(c)(i)
Outside Date		8.1(b)(i)
Owned Real Property		4.17(b)
Parent		Preamble
Parent Plan		6.9(c)
Paying Agent		3.3(a)
Payment Fund		3.3(a)
PBGC		4.10(c)(iii)
Permits		4.9
Preferred Stock		4.4
Proxy Statement		6.6(a)
RCRA		4.12(c)(i)
Representatives		6.4(a)
SDWA		4.12(c)(i)

 

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Section 203		4.19
Superior Proposal		6.4(f)(ii)
Surviving Corporation		2.1
Takeover Laws		4.19
Termination Fee		8.3(b)(iv)
TSCA		4.12(c)(i)
United States Government		4.15(a)(iv)
WARN		6.9(e)

 

Section 1.3                                       Interpretations .  For purposes of this Agreement:

 

(a)           When a reference is made in this Agreement to an Article, Section, Exhibit or Schedule, such reference shall be to an Article, Section, Exhibit or Schedule of or to this Agreement, unless otherwise indicated.

 

(b)           The table of contents and headings contained in this Agreement or in any Exhibit or Schedule (including the Company Disclosure Schedule) are for convenience of reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

 

(c)           All words used in this Agreement will be construed to be of such gender or number as the circumstances require.

 

(d)           Any capitalized terms used in any Exhibit or Schedule (including the Company Disclosure Schedule) but not otherwise defined therein shall have the meaning as defined in this Agreement.

 

(e)           All Exhibits and Schedules (including the Company Disclosure Schedule) annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth herein.

 

(f)            The word “including” and words of similar import when used in this Agreement will mean “including, without limitation,” unless otherwise specified.

 

(g)           All references to “dollars” or “$” or “US$” in this Agreement refer to United States dollars, which is the currency used for all purposes in this Agreement.

 

ARTICLE II
THE MERGER

 

Section 2.1                                       The Merger .  Upon the terms and subject to the conditions set forth in this Agreement and in accordance with the DGCL, at the Effective Time, Merger Sub shall be merged with and into the Company.  Following the Merger, the separate corporate existence of Merger Sub shall cease, and the Company shall continue as the surviving corporation in the Merger (the “ Surviving Corporation ”) and as a wholly-owned subsidiary of Parent.

 

Section 2.2                                       Closing .  The closing of the Merger (the “ Closing ”) shall take place at 10:00 a.m., Pacific time, as soon as practicable but in no event later than the third Business Day

 

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following the satisfaction or, to the extent permitted by applicable Law, waiver of the conditions set forth in Article VII (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 applicable Law, waiver of those conditions), at the offices of Gibson, Dunn & Crutcher LLP, 333 South Grand Avenue, Los Angeles, CA 90071, or such other date, time or place as the parties may agree in writing.  The date on which the Closing occurs is referred to in this Agreement as the “ Closing Date .”

 

Section 2.3                                       Effective Time .  Upon the terms and subject to the conditions of this Agreement, as soon as practicable on the Closing Date, the parties shall file a certificate of merger (the “ Certificate of Merger ”) with the Secretary of State of the State of Delaware, executed in accordance with the relevant provisions of the DGCL, and, as soon as practicable on or after the Closing Date, shall make any and all other filings or recordings required under the DGCL in order to effect 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 other date or time as Parent and the Company shall agree in writing and shall specify in the Certificate of Merger.  The date and time when the Merger becomes effective is referred to in this Agreement as the “ Effective Time .”

 

Section 2.4                                       Effects of the Merger .  The Merger shall have the effects set forth in this Agreement and in the relevant provisions of the DGCL.  Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, 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.

 

Section 2.5                                       Certificate of Incorporation; Bylaws .

 

(a)           The certificate of incorporation of Merger Sub, as in effect immediately prior to the Effective Time, shall be the certificate of incorporation of the Surviving Corporation until thereafter amended in accordance with the provisions thereof and applicable Law, except that Article II thereof shall read as follows:  “FIRST:  The name of the Corporation is Hi-Shear Technology Corporation.”

 

(b)           The Bylaws of Merger Sub, as in effect immediately prior to the Effective Time, shall be the Bylaws of the Surviving Corporation until thereafter amended in accordance with the provisions thereof and applicable Law, except that such Bylaws shall be amended to reflect that the name of Surviving Corporation shall be Hi-Shear Technology Corporation.

 

Section 2.6             Directors .  The Persons set forth on Schedule 2.6 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.

 

Section 2.7             Officers .  The Persons set forth on Schedule 2.7 shall be the officers of the Surviving Corporation until the earlier of their resignation or removal or until their respective successors are duly elected and qualified.

 

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ARTICLE III

EFFECT ON THE CAPITAL STOCK OF THE

CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES

 

Section 3.1                                       Conversion of Capital Stock .  At the Effective Time, by virtue of the Merger and without any action on the part of the Company, Parent, Merger Sub or the holders of any shares of capital stock of the Company, Parent or Merger Sub:

 

(a)                                   Each Share issued and outstanding immediately prior to the Effective Time (other than (i) Shares to be canceled in accordance with Section 3.1(b)  and (ii) any Dissenting Shares) shall thereupon be converted automatically into and shall thereafter represent the right to receive the Per Share Merger Consideration in cash, without interest.

 

(b)                                  Each Share held in the treasury of the Company or owned, directly or indirectly, by Parent or Merger Sub immediately prior to the Effective Time shall automatically be canceled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor.

 

(c)                                   Each share of common stock, par value $.001 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one validly issued, fully paid and non-assessable share of common stock, par value $.001 per share, of the Surviving Corporation.

 

(d)                                  If at any time during the period between the date of this Agreement and the Effective Time, any change in the outstanding shares of capital stock of the Company, or securities convertible into or exchangeable into or exercisable for shares of such capital stock, shall occur as a result of any reclassification, recapitalization, stock split (including a reverse stock split) or subdivision or combination, exchange or readjustment of shares, or any stock dividend or stock distribution with a record date during such period (excluding, in each case, normal quarterly cash dividends), merger or other similar transaction, the Merger Consideration shall be equitably adjusted, without duplication, to reflect such change.

 

Section 3.2                                       Treatment of Options and Other Equity-Based Awards .

 

(a)                                   At the Effective Time, each option or similar right (each, a “ Company Stock Option ”) to purchase Shares granted under any Company Equity Plan, whether vested or unvested, that is outstanding immediately prior to the Effective Time shall be canceled and, in exchange therefor, Parent shall pay or cause the Surviving Corporation to pay to each former holder of any such canceled Company Stock Option as soon as practicable following the Effective Time (and in no event later than three Business Days thereafter) an amount in cash, without interest, equal to the product of (i) the excess of the Per Share Merger Consideration over the exercise price per Share under such Company Stock Option and (ii) the number of Shares subject to such Company Stock Option; provided, that if the exercise price per Share of any such Company Stock Option is equal to or greater than the Per Share Merger Consideration, such Company Stock Option shall be canceled without any cash payment being made in respect thereof.

 

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(b)                                  At the Effective Time, each restricted stock unit or similar right (each, a “ Company RSU ”) to purchase Shares granted under any Company Equity Plan, whether vested or unvested, that is outstanding immediately prior to the Effective Time shall be canceled and, in exchange therefor, Parent shall pay or cause the Surviving Corporation to pay to each former holder of each such canceled Company RSU as soon as practicable following the Effective Time, an amount in cash, without interest, equal to the Per Share Merger Consideration per Share underlying such Company RSU.  Notwithstanding the foregoing, no Merger Consideration shall be payable with respect to any Company RSU to the extent Shares shall have been issued thereunder prior to the Effective Time, and such Company RSU shall have no force and effect following the Effective Time.

 

(c)                                   Prior to the Effective Time, the Company shall use its commercially reasonable efforts to obtain all consents and make all amendments, if any, to the terms of the Company Equity Plans and each outstanding Company Stock Option and Company RSU award agreement, and shall take all other actions within its control that are necessary to give effect to the provisions of this Section 3.2 .

 

Section 3.3                                       Exchange and Payment .

 

(a)                                   Prior to the Effective Time, Parent shall enter into an agreement with a bank or trust company reasonably acceptable to the Company to act as paying agent for the Company Stockholders in connection with the Merger (the “ Paying Agent ”) to receive the aggregate Merger Consideration to which the Company Stockholders shall become entitled pursuant to Section 3.1 and Section 3.2.   As promptly as practicable following the Effective Time and in any event not later than the first Business Day thereafter, Parent shall deposit (or cause to be deposited) with the Paying Agent cash in an amount sufficient to make all payments pursuant to Section 3.1 and Section 3.2 (such cash being hereinafter referred to as the “ Payment Fund ”).  The Payment Fund shall not be used for any purpose other than to fund payments due pursuant to Section 3.1 and Section 3.2 , except as provided in this Agreement.  Parent shall pay or cause the Surviving Corporation to pay all charges and expenses, including those of the Paying Agent, incurred by it in connection with the exchange of Shares for the Merger Consideration and other amounts contemplated by Section 3.1 and Section 3.2 .

 

(b)                                  As promptly as practicable following the Effective Time and in any event not later than the third Business Day thereafter, Parent and the Surviving Corporation shall cause the Paying Agent to mail to each holder of record of (i) an outstanding certificate or outstanding certificates (“ Certificates ”) that immediately prior to the Effective Time represented outstanding Shares or (ii) uncertificated Shares represented by book-entry (“ Book-Entry Shares ”) which, in each case, were converted into the right to receive the Per Share Merger Consideration with respect thereto pursuant to Section 3.1(a) , (A) a form of letter of transmittal (which shall be in customary form and shall specify that delivery shall be effected, and risk of loss and title to the Certificates or Book-Entry Shares held by such Person shall pass, only upon proper delivery of the Certificates to the Paying Agent or, in the case of Book-Entry Shares, upon adherence to the procedures set forth in the letter of transmittal) and (B) instructions for use in effecting the surrender of Certificates or Book-Entry Shares in exchange for the Merger Consideration payable with respect thereto pursuant to Section 3.1(a) .  Upon surrender of a Certificate or Book-Entry Share to the Paying Agent, together with such letter of transmittal, duly completed and validly executed, and such other documents as the Paying Agent may reasonably require, the

 

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holder of such Certificate or Book-Entry Share shall be entitled to receive in exchange therefor the Per Share Merger Consideration for each Share formerly represented by such Certificate or Book-Entry Share, and such Certificate or Book-Entry Share shall forthwith be canceled.  No interest shall be paid or shall accrue on any cash payable upon surrender of any Certificate or Book-Entry Share.  In the event that the Merger Consideration is to be paid to a Person other than the Person in whose name any Certificate is registered, it shall be a condition of payment that the Certificate so surrendered shall be properly endorsed or otherwise in proper form for transfer, that the signatures on such Certificate or any related stock power shall be properly guaranteed and that the Person requesting such payment shall pay any transfer or other Taxes required by reason of such payment to a Person other than the registered holder of such Certificate or establish to the satisfaction of the Surviving Corporation that such Taxes have been paid or are not applicable.  Until surrendered as contemplated by this Section 3.3 , each share represented by a Certificate and each Book-Entry Share shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender or transfer the Per Share Merger Consideration payable in respect of each Share theretofore represented by such Certificate or Book-Entry Share, as applicable, pursuant to Section 3.1(a) , without any interest thereon.

 

(c)                                   All cash paid upon the surrender for exchange of Certificates or Book-Entry Shares in accordance with the terms of this Article III shall be deemed to have been paid in full satisfaction of all rights pertaining to the Shares formerly represented by such Certificates or Book-Entry Shares.  At the Effective Time, the stock transfer books of the Company shall be closed and there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the Shares that were outstanding immediately prior to the Effective Time.  If, after the Effective Time, Certificates are presented to the Surviving Corporation or the Paying Agent for transfer or transfer is sought for Book-Entry Shares, such Certificates or Book-Entry Shares shall be canceled and exchanged as provided in this Article III , subject to applicable Law in the case of Dissenting Shares.

 

(d)                                  The Paying Agent shall invest any cash included in the Payment Fund as directed by Parent in investments that are customary for transactions of similar nature and size as the Merger.  If for any reason (including investment losses) the cash in the Payment Fund is insufficient to fully satisfy all of the payment obligations to be made in cash by the Paying Agent hereunder (but subject to Section 3.4 ), Parent shall promptly deposit (or cause to be deposited) cash into the Payment Fund in an amount which is equal to the deficiency in the amount of cash required to fully satisfy such cash payment obligations.  Any interest and other income resulting from such investments shall be payable to the Surviving Corporation.

 

(e)                                   At any time following the date that is twelve (12) months after the Effective Time, the Surviving Corporation shall be entitled to require the Paying Agent to deliver to it any funds (including any interest received with respect thereto) which have been made available to the Paying Agent and which have not been disbursed to holders of Certificates or Book-Entry Shares, and thereafter such holders shall be entitled to look to Parent and the Surviving Corporation (subject to abandoned property, escheat or other similar laws) only as general creditors thereof with respect to the portion of the Merger Consideration payable upon due surrender of their Certificate or Book-Entry Shares.

 

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(f)                                     If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit, in form and substance reasonably acceptable to Parent, of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by Parent or the Paying Agent, the posting by such Person of a bond in such amount as Parent or the Paying Agent may determine is reasonably necessary as indemnity against any claim that may be made against it or the Surviving Corporation with respect to such Certificate, the Paying Agent will deliver in exchange for such lost, stolen or destroyed Certificate the Merger Consideration payable in respect thereof pursuant to this Agreement.

 

Section 3.4                                       Withholding Rights .  Parent, the Surviving Corporation or the Paying Agent shall be entitled to deduct and withhold from the consideration otherwise payable to any holder of Shares, Company Stock Options and Company RSUs or otherwise pursuant to this Agreement, such amounts as Parent, the Surviving Corporation or the Paying Agent is or are required to deduct and withhold with respect to the making of such payment under 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 Person in respect of which such deduction and withholding was made.

 

Section 3.5                                       Dissenting Shares .  Notwithstanding anything in this Agreement to the contrary, Shares issued and outstanding immediately prior to the Effective Time that are held by any holder who has not voted in favor of the Merger and who is entitled to demand and properly demands appraisal of such Shares pursuant to Section 262 of the DGCL (“ Dissenting Shares ”) shall not be converted into the right to receive the Merger Consideration, unless and until such holder shall have failed to perfect, or shall have effectively withdrawn or lost, such holder’s right to appraisal under the DGCL.  Dissenting Shares shall be treated in accordance with Section 262 of the DGCL.  If any such holder fails to perfect or withdraws or loses any such right to appraisal, each such Share of such holder shall thereupon be converted into and become exchangeable only for the right to receive, as of the later of the Effective Time and the time that such right to appraisal has been irrevocably lost, withdrawn or expired, the Merger Consideration in accordance with Section 3.1(a) .  The Company shall serve prompt notice to Parent of any demands for appraisal of any Shares, attempted withdrawals of such notices or demands and any other instruments received by the Company relating to rights to appraisal, and Parent shall have the right to participate in all negotiations and proceedings with respect to such demands.  The Company shall not, without the prior written consent of Parent, make any payment with respect to, or settle or offer to settle, any such demands.

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

Except as set forth in the disclosure schedule delivered by the Company to Parent concurrent with the execution of this Agreement (the “ Company Disclosure Schedule ”), the Company represents and warrants to Parent and Merger Sub as follows:

 

Section 4.1                                       Organization, Standing and Power .

 

(a)                                   The Company (i) is a corporation duly organized, validly existing and in good standing under the Laws of the State of Delaware (ii) has all requisite corporate or similar

 

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power and authority to own, lease and operate its properties and to carry on its business in all material respects as now being conducted and (iii) is duly qualified or licensed to do business and is in good standing (with respect to jurisdictions that recognize such concept) in each jurisdiction in which the nature of its business or the ownership, leasing or operation of its properties makes such qualification or licensing necessary, except with respect to clause (iii) for any such failures to be so qualified or licensed or in good standing as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(b)                                  The Company has previously furnished or otherwise made available to Parent a true and complete copy of the Company’s certificate of incorporation (the “ Company Charter ”) and bylaws (the “ Company Bylaws ”), in each case as amended to the date of this Agreement, and each as so delivered is in full force and effect.  The Company is not in violation of any of the provisions of the Company Charter or the Company Bylaws.

 

Section 4.2                                       Authority .  The Company has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and, subject to adoption and approval of this Agreement by the holders of a majority of the outstanding Shares (the “ Company Stockholder Approval ”), to consummate the transactions contemplated hereby.  The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby 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 approve this Agreement or to consummate the transactions contemplated hereby, subject, in the case of the consummation of the Merger, to obtaining the Company Stockholder Approval, and to the filing of the Certificate of Merger with the Secretary of State of the State of Delaware as required by the DGCL.  This Agreement has been duly executed and delivered by the Company and, assuming the due authorization, execution and delivery by Parent and Merger Sub, constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or similar Laws affecting the enforcement of creditors’ rights generally or by general principles of equity.  As of the date hereof, the Company Board has (i) determined that the Merger and the other transactions contemplated by this Agreement are fair, advisable and in the best interests of the Company and its stockholders, (ii) adopted and approved this Agreement and the Merger and the other transactions contemplated hereby, on the terms and subject to the conditions set forth in this Agreement, and (iii) subject to Section 6.4 , has resolved to recommend that the Company Stockholders approve this Agreement and the transactions contemplated hereby.

 

Section 4.3                                       No Conflict; Consents and Approvals .

 

(a)                                   Except as set forth on Schedule 4.3(a)  of the Company Disclosure Schedule, the execution, delivery and performance of this Agreement by the Company, and the consummation by the Company of the transactions contemplated hereby, do not and will not (i) conflict with or violate the Company Charter or Company Bylaws, (ii) assuming that all consents, approvals and authorizations contemplated by clauses (i) through (v) of Section 4.3(b)  below have been obtained and all filings described in such clauses have been made, conflict with or violate any Law applicable to the Company or by which any of its properties are bound or (iii) result in any breach or violation of, or constitute a default (or an event which with notice or

 

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lapse of time or both would become a default), or result in the loss of a benefit under, or give rise to any right of termination, cancellation, amendment or acceleration of, result in triggering any payment or other obligations, or result in the creation of a Lien on any property or asset of the Company pursuant to, any Contract to which the Company is a party or by which the Company or any of its properties are bound, except, in the case of clauses (ii) and (iii), for any such conflict, breach, violation, default, loss, right or other occurrence that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(b)                                  Except as set forth on Schedule 4.3(b)  of the Company Disclosure Schedule, the execution, delivery and performance of this Agreement by the Company, and the consummation by the Company of the transactions contemplated hereby, do not and will not require any consent, approval, authorization or permit of, action by, filing with or notification to, any Governmental Authority, except for (i) such filings as required under applicable requirements of the Exchange Act and the rules and regulations promulgated thereunder, and under state securities and “blue sky” laws, (ii) the filings required under the HSR Act and any filings required under the applicable requirements of antitrust or other competition laws of jurisdictions other than the United States or investment laws relating to foreign ownership (“ Foreign Antitrust Laws ”), (iii) any requirements set forth in the Exon-Florio Amendment to the Defense Production Act of 1950, as amended (“ Exon-Florio ”), (iv) the requirements set forth in Part 122.4(b) of the International Traffic in Arms Regulations (“ ITAR ”) of the U.S. Department of State, (v) such filings as necessary to comply with the applicable requirements of the NYSE Amex, and (vi) the filing with the Secretary of State of the State of Delaware of the Certificate of Merger as required by the DGCL.

 

Section 4.4                                       Capitalization .  The authorized capital stock of the Company consists of (a) 25,000,000 Shares and (b) 500,000 shares of preferred stock, par value $1.00 per share (the “ Preferred Stock ”).  As of the date of this Agreement, (i) 6,852,416 Shares were issued and outstanding, all of which were validly issued, fully paid and nonassessable and were free of preemptive rights, (ii) no Shares were held in treasury, (iii) no shares of Preferred Stock were outstanding, (iv) an aggregate of 28,719 Shares were subject to or otherwise deliverable in connection with the exercise of outstanding Company Stock Options issued pursuant to the Company Equity Plans, and (v) an aggregate of 12,235 Shares underlying outstanding Company RSUs issued pursuant to Company Equity Plans.  Except as set forth above and except for changes since the date of this Agreement resulting from the exercise of Company Stock Options or vesting of Company RSUs outstanding on such date, as of the date of this Agreement, (A) there are not outstanding or authorized any (1) shares of capital stock or other voting securities of the Company, (2) securities of the Company convertible into or exchangeable for shares of capital stock or voting securities of the Company or (3) 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 of the Company, (B) there are no outstanding obligations of the Company to repurchase, redeem or otherwise acquire any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of the Company and (C) except as set forth on Schedule 4.4 of the Company Disclosure Schedule, there are no other options, calls, warrants or other rights, agreements, arrangements or commitments of any character relating to the issued or unissued capital stock of the Company to which the Company is a party.  The Company does not have any Subsidiaries.

 

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Section 4.5                                       SEC Reports; Financial Statements .

 

(a)                                   Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, (i) the Company has filed or otherwise transmitted all forms, reports, statements, certifications and other documents (including all exhibits, amendments and supplements thereto) required to be filed by it with the SEC since June 1, 2007 (all such forms, reports, statements, certificates and other documents filed since June 1, 2007 and prior to the date of this Agreement, collectively, the “ Company SEC Reports ”), and (ii) as of their respective dates, or, if amended, as of the date of the last such amendment, each of the Company SEC Reports complied with the applicable requirements of the Securities Act and the Exchange Act, and the applicable rules and regulations promulgated thereunder, as the case may be, each as in effect on the date so filed.  Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect and except to the extent that information in any Company SEC Report has been revised or superseded by a subsequently filed Company SEC Report, none of the Company SEC Reports contains any untrue statement of a material fact or omits to state a material fact required to be stated or incorporated by reference therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

(b)                                  All of the audited financial statements included in the Company SEC Reports, in each case, including any related notes thereto, as filed with the SEC (those filed with the SEC are collectively referred to as the “ Company Financial Statements ”) (i) complied, as of their respective dates of filing with the SEC, in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, (ii) have been prepared in accordance with GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto) and (iii) fairly present in all material respects the financial position of the Company at the respective dates thereof and the results of its operations and cash flows for the periods indicated.

 

(c)                                   The Company has no Liabilities of any nature other than Liabilities (i) as and to the extent reflected or reserved against on the balance sheet set forth in the Company Financial Statements, (ii) Liabilities not required by GAAP to be set forth or reserved on a balance sheet of the Company or in the notes thereto, or (iii) incurred in the ordinary course of business consistent with past practice since May 31, 2009, or (iv) arising from contractual obligations to be performed after the date hereof under Contracts set forth on Schedule 4.14 of the Company Disclosure Schedule.

 

Section 4.6                                       Company Information .  None of the information supplied or to be supplied by the Company for inclusion or incorporation by reference in and actually included or incorporated by reference in the Proxy Statement or any other documents to be filed with the SEC in connection with the Merger or the other transactions contemplated hereby will, at the respective times such information is included in such documents so filed and at the time any amendment or supplement thereto is filed, contain any untrue statement of a material fact, or omit to state any material fact required or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading.

 

Section 4.7                                       Absence of Certain Changes or Events .  Except as set forth on Schedule 4.7 of the Company Disclosure Schedule, since May 31, 2009, (i) the business of the

 

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Company has been conducted in the ordinary course of business consistent with past practice, and (ii) there has not occurred any Material Adverse Effect.  Since May 31, 2009, the Company has not taken any action that, if taken after the date of this Agreement without the prior written consent of Parent, would constitute a breach of Section 6.1 .

 

Section 4.8                                       Litigation .

 

(a)                                   Except as set forth on Schedule 4.8 of the Company Disclosure Schedule, there is no Action pending or, to the Knowledge of the Company, threatened against the Company or any property or asset of the Company.  To the Knowledge of the Company, there is no existing allegation, condition, situation or set of circumstances that would reasonably be expected to give rise to a material Action.

 

(b)                                  There are not currently pending, nor have there been since May 31, 2007, any internal investigations conducted by the Company or the Company Board (or any committee thereof) concerning any financial, accounting, tax, conflict of interest, illegal activity, fraudulent or deceptive conduct involving the Company or its officers or employees.  As of the date hereof, there is no material Action that the Company intends to initiate.

 

Section 4.9                                       Compliance with Laws; Permits .  The Company is in compliance in all material respects with all Laws applicable to it or by which any of its properties are bound.  Since May 31, 2007, the Company has not received any written notice from any Governmental Authority alleging that it is not in compliance in any material respect with any Law.  Except as set forth on Schedule 4.9 of the Company Disclosure Schedule, the Company has all material permits, licenses, exemptions, authorizations, franchises, orders and approvals of all Governmental Authorities (collectively, “ Permits ”) necessary for it to own, lease and operate its properties or to carry on its businesses as now conducted.  Notwithstanding the foregoing, no representation or warranty is made in this Section 4.9 with respect to (a) the Securities Act or the Exchange Act, which are covered in Section 4.5 and Section 4.6 , (b) employee benefit and ERISA matters, which are covered in Section 4.10 , (c) Environmental Laws (including applicable Laws with respect to Environmental Permits), which are covered in Section 4.12 , (d) applicable Laws with respect to Taxes, which are covered in Section 4.13 , and (e) applicable Laws with respect to Company Government Contracts or Company Government Subcontracts, which are covered in Section 4.15 .

 

Section 4.10                                 Benefit Plans .

 

(a)                                   Schedule 4.10 of the Company Disclosure Schedule lists each “employee benefit plan” (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”)), and all stock purchase, stock option, severance, employment, change-in-control, fringe benefit, bonus, incentive, deferred compensation and all other employee benefit plans, agreements, programs, policies or other arrangements, whether or not subject to ERISA, under which any employee or former employee of the Company has any present or future right to benefits or the Company has had or has any present or future liability.  All such plans, agreements, programs, policies and arrangements shall be collectively referred to as the “ Company Plans ”; provided, however, that there shall be no obligation to list on Schedule 4.10 of the Company Disclosure Schedule any Company Plan that is not material to the Company.  With respect to each Company Plan, the Company has furnished or made available to

 

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Parent a current, accurate and complete copy thereof and, to the extent applicable:  (i) any related trust agreement or other funding instrument, (ii) the most recent determination letter of the IRS, if applicable, (iii) any summary plan description and (iv) if applicable, for the most recent year (A) the Form 5500 and attached schedules, (B) audited financial statements, and (C) actuarial valuation reports.

 

(b)                                  Except as set forth on Schedule 4.10 of the Company Disclosure Schedule, the Company Plans have been maintained and administered in all material respects in accordance with their terms and Law.

 

(c)                                   With respect to the Company Plans:

 

(i)                                      each Company Plan subject to ERISA has been established and administered in accordance with its terms and in compliance with the applicable provisions of ERISA and the Code, and no prohibited transaction, as described in Section 406 of ERISA or Section 4975 of the Code, has occurred with respect to any Company Plan;

 

(ii)                                   each Company Plan intended to be qualified under Section 401(a) of the Code has received a favorable determination, advisory and/or opinion letter, as applicable, from the IRS that it is so qualified (or the deadline for obtaining such a letter has not expired as of the date of this Agreement) and, to the Knowledge of the Company, nothing has occurred since the date of such letter that would reasonably be expected to materially and adversely affect such determination or opinion;

 

(iii)                                there is no Action (including any investigation, audit or other administrative proceeding) by the Department of Labor, the Pension Benefit Guaranty Corporation (the “ PBGC ”), the IRS or any other Governmental Authority or by any plan participant or beneficiary pending, or to the Knowledge of the Company, threatened, relating to the Company Plans, any fiduciaries thereof with respect to their duties to the Company Plans or the assets of any of the trusts under any of the Company Plans (other than routine claims for benefits) nor are there facts or circumstances that exist that would reasonably be expected to give rise to any such Actions;

 

(iv)                               no Company Plan is subject to Title IV of ERISA or subject to Section 412 of the Code;

 

(v)                                  no Company Plan is a  “multiemployer plan” (within the meaning of Section 3(37) of ERISA;

 

(vi)                               the Company does not maintain any Company Plan that is a “group health plan” (as such term is defined in Section 5000(b)(1) of the Code) that has not been administered and operated in all material respects in compliance with the applicable requirements of Section 601 of ERISA and Section 4980B(b) of the Code, and the Company is not subject to any material liability, including additional contributions, fines, penalties or loss of tax deduction as a result of such administration and operation;

 

(vii)                            none of the Company Plans provides for payment of a benefit, the increase of a benefit amount, the payment of a contingent benefit or the acceleration of the payment or vesting of a benefit determined or occasioned, in whole or in part, by reason of the execution of this Agreement or the consummation of the transactions contemplated hereby; and

 

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(viii)                         each Company Plan that is a “nonqualified deferred compensation plan” within the meaning of Section 409A(d)(1) of the Code (a “ Nonqualified Deferred Compensation Plan ”) subject to Section 409A of the Code is designed and has been administered in compliance with Section 409A of the Code since January 1, 2008.

 

(d)                                  All material contributions required to be made as of the Effective Time under each Company Plan pursuant to the terms of each Company Plan, applicable Law or the Company’s existing funding and contribution practices have been made, and all material benefits required to be paid or distributed as of the Effective Time from each Company Plan pursuant to the terms of each Company Plan, applicable Law or the Company’s existing benefit payment and distribution practices have been made from such Company Plan, except to the extent reflected as a liability on the Company Financial Statements.

 

Section 4.11                                 Labor Matters .  The Company is not a party to, or bound by, any collective bargaining agreement with any labor union or labor organization.  There is no labor dispute, strike, work stoppage or lockout, or, to the Knowledge of the Company, threat thereof, by or with respect to any employees of the Company.

 

Section 4.12                                 Environmental Matters .

 

(a)                                   Except as set forth in any environmental assessments, reports or plans (including any Phase I reports) set forth on Schedule 4.12(a)  of the Company Disclosure Schedule and previously made available to Parent and Merger Sub or as set forth on Schedule 4.12(a)  of the Company Disclosure Schedule:  (i) to the Knowledge of the Company, the Company is in compliance with all applicable Environmental Laws, and possesses and is in compliance with all applicable Environmental Permits required under such Environmental Laws to operate as it presently operates; (ii) the Company has not within the past three (3) years received any written claim, complaint or notification, and is not presently subject to any proceeding, relating to noncompliance with Environmental Laws or any other liabilities pursuant to Environmental Laws, and to the Knowledge of the Company, no such matter has been threatened in writing; (iii) to the Knowledge of the Company, there are no Hazardous Materials present at, on, under, about, or migrating onto, from or under any real property ever owned or leased by the Company, the presence of which requires investigation, cleanup or remediation under any Environmental Laws or exists at levels above any existing or proposed federal or state voluntary or regulatory cleanup objectives; and (iv) to the Knowledge of the Company no properties ever owned or operated by the Company, and no offsite locations to which Hazardous Materials related to or arising from the Company’s operations have been sent for recycling, storage, treatment or disposal, have been proposed for listing on, or have been listed on any federal or state list of sites requiring or potentially requiring remediation, or have been otherwise identified by a Governmental Authority as a site requiring or potentially requiring cleanup or remediation under state or federal Environmental Laws.

 

(b)                                  Notwithstanding any other representations and warranties in this Agreement, the representations and warranties contained in this Section 4.12 are the only representations and warranties in this Agreement with respect to Environmental Laws, Hazardous Materials or any other health or safety matters related to the Company and its subsidiaries.

 

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(c)                                   For purposes of this Agreement, the following terms shall have the meanings assigned below:

 

(i)                                      “ Environmental Laws ” means all federal, state, regional, county and local statutes, regulations. ordinances, rules, regulations, and policies, all court and administrative orders and decrees and arbitration awards, and the common law, which pertain to environmental matters or contamination of any type whatsoever, including but not limited to those relating to:  manufacture, processing, use, distribution, treatment, storage, disposal, generation or transportation of Hazardous Materials; air, water (including surface water, groundwater, and storm water) or soil (including subsoil) contamination or pollution; releases of Hazardous Materials, protection of wildlife, endangered species, wetlands or natural resources; health and safety of employees and other persons; and notification requirements relating to the foregoing, including, without limitation, the following statutes, and regulations adopted thereunder:  the Comprehensive Environmental Response, Compensation and Liability Act, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. § 9601 et seq. (“ CERCLA ”); the Solid Waste Disposal Act, as amended by the Resource Conservation Recovery Act and the Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. § 6901 et seq. (“ RCRA ”); the Federal Water Pollution Control Act, as amended by the Clean Water Act of 1977, 33 U.S.C. § 1251 et seq. (“ CWA ”); the Clean Air Act, as amended, 42 U.S.C. § 7401 et seq. (“ CAA ”); the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq. (“ TSCA ”); the Safe Drinking Water Act, 42 U.S.C. §§ 300f through 300j (“ SDWA ”); the Hazardous Materials Transportation Act, 49 U.S.C. § 1801 et seq. (“ HMTA ”); the Oil Pollution Act of 1990, 33 U.S.C. § 2701 et seq. (“ OPA ”); the Emergency Planning and Community Right-to-Know Act, 42 U.S.C. § 11001 et seq. (“ EPCRA ”); and the Occupational Safety and Health Act, 19 U.S.C. § 6251 et seq. (“ OSHA ”).

 

(ii)                                   “ Environmental Permits ” means any permits, licenses, registrations, governmental approvals, agreements, reports and consents applied for, pending by, issued or given, or required under applicable Environmental Laws.

 

(iii)                                “ Hazardous Materials ” shall mean any substance, chemical, compound, product, solid, gas, liquid, waste, byproduct, pollutant, contaminant, or material, and includes, without limitation: (a) asbestos, polychlorinated biphenyls, or petroleum (including crude oil or any fraction thereof); (b) any material classified or regulated as “hazardous” or “toxic” pursuant to CERCLA; (c) any contaminant or waste regulated under RCRA; and (d) any substance regulated under the CWA, CAA, TSCA, HMTA, or OSHA.

 

Section 4.13                                 Taxes .

 

Except as set forth on Schedule 4.13 of the Company Disclosure Schedule:

 

(a)                                   all material Returns required by applicable Law to be filed by or on behalf of the Company have been timely filed in accordance with all applicable Laws (after giving effect to any extensions of time in which to make such filings), and all such Returns were, at the time of filing, true and complete;

 

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(b)            the Company has withheld all material Taxes and is not delinquent in the payment of any material Tax, except with respect to matters for which adequate reserves have been established in the Company Financial Statements in accordance with GAAP;

 

(c)            no Liens for any material Taxes exist with respect to any assets or properties of the Company, except for statutory Liens for Taxes not yet delinquent;

 

(d)            there are no Actions or audits now pending or, to the Knowledge of the Company, threatened in writing against or with respect to the Company with respect to any material Tax;

 

(e)            the Company is not currently the beneficiary of any extension of time within which to file any Return;

 

(f)             the Company has not waived any statute of limitations with respect to Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency (which waiver or extension is currently in effect) or entered into any agreement with a Governmental Authority with regard to Taxes that may affect any tax period after the Closing Date;

 

(g)            the Company is not obligated to make any payments and is not a party to any agreement or agreements that, individually or collectively, provide for the payment by the Company in connection with the transactions contemplated by this Agreement of any amount of salaries or other compensation for services  that is an “excess parachute payment” pursuant to Section 280G of the Code;

 

(h)            the Company has not made any payments that were not deductible by reason of Section 162(m) of the Code for any period ending on or before the Closing Date;

 

(i)             the Company is not a party to any Tax allocation, reimbursement, sharing or indemnification agreement, and there is no obligation of the Company to contribute to the payment of any Tax or any portion of any Tax of any Person other than the Company (in each case, other than pursuant to customary Tax indemnifications contained in credit or other commercial lending agreements, stock or asset purchase agreements, or arrangements with landlords, lessors, customers and vendors);

 

(j)             the Company has not been included in any “consolidated,” “unitary” or “combined” Return for any year;

 

(k)            during the five (5) year period ending on the date of this Agreement, the Company has not been a distributing corporation or a controlled corporation in a transaction that was intended to be governed by Section 355 of the Code; and

 

(l)             the Company will not be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or any portion thereof) ending after the Closing Date as a result of any:  (A) change in method of accounting for a taxable period ending on or prior to the Closing Date pursuant to Section 481(a) of the Code (or any corresponding provision of state or local Tax law); or (B) prepaid amount received on or prior to the Closing Date.

 

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Section 4.14            Material Contracts .

 

(a)            Except for this Agreement and except as set forth on Schedule 4.14 of the Company Disclosure Schedule, as of the date hereof, the Company is not a party to or bound by any Contract that (i) would be required to be filed by the Company as a “material contract” pursuant to Item 601(b)(10) of Regulation S-K; (ii) provides for aggregate payments by or to the Company reasonably expected to exceed $500,000 during the current term thereof; (iii) would, to the Knowledge of the Company, restrict the freedom of Parent or any of its Affiliates (including the Company) to engage in any line of business or to conduct business in any geography; (iv) relating to the employment of any Person, including any Contract containing severance or termination pay Liabilities related to termination of employment; or (v) relating to the borrowing of money or the guaranty of any such obligation (each, a “ Material Contract ”).

 

(b)            Each Material Contract is valid and binding on the Company and, to the Knowledge of the Company, any other party thereto.  There is no material violation or default under any Material Contract by the Company or, to the Knowledge of the Company, any other party thereto, and no event has occurred that with the lapse of time or the giving of notice or both would constitute a material default thereunder by the Company or, to the Knowledge of the Company, any other party thereto.

 

Section 4.15            Government Contracts .

 

(a)            Except as set forth on Schedule 4.15(a)  of the Company Disclosure Schedule, with respect to each Contract between the Company, on the one hand, and any Governmental Authority, on the other hand