TABLE OF CONTENTS

 

ARTICLE I THE OFFER		2
Section 1.01.	The Offer	2
Section 1.02.	Company Action	5
Section 1.03.	Board of Directors and Committees; Section 14(f)	6
Section 1.04.	Top-Up Option	7
Section 1.05.	Short Form Merger	8
ARTICLE II THE MERGER		8
Section 2.01.	The Merger	8
Section 2.02.	Closing	9
Section 2.03.	Effect of the Merger	9
Section 2.04.	Certificate of Incorporation of the Surviving Corporation	9
Section 2.05.	Bylaws of the Surviving Corporation	9
Section 2.06.	Directors and Officers of the Surviving Corporation	9
ARTICLE III EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES		10
Section 3.01.	Conversion of Securities	10
Section 3.02.	Dissenting Stockholders	12
Section 3.03.	Exchange of Certificates	13
Section 3.04.	Stock Transfer Books	15
Section 3.05.	Company Stock Options	15
Section 3.06.	Employee Stock Purchase Plan	16
Section 3.07.	Restricted Stock	16
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY		17
Section 4.01.	Organization and Qualification	17
Section 4.02.	Capitalization	17
Section 4.03.	Subsidiaries	18
Section 4.04.	Authority; Non-Contravention; Approvals	18
Section 4.05.	Reports and Financial Statements	20
Section 4.06.	Absence of Undisclosed Liabilities	21
Section 4.07.	Litigation	21
Section 4.08.	Absence of Certain Changes or Events	21
Section 4.09.	Compliance with Applicable Law; Permits	22
Section 4.10.	Company Material Contracts; Defaults	22
Section 4.11.	Taxes	23
Section 4.12.	Employee Benefit Plans; ERISA	25
Section 4.13.	Labor and Other Employment Matters	26
Section 4.14.	Environmental Matters	27
Section 4.15.	Intellectual Property	27
Section 4.16.	Real Property	30
Section 4.17.	Regulatory Compliance	31
Section 4.18.	Insurance	32
Section 4.19.	Opinion of Financial Advisor	33
Section 4.20.	Brokers and Finders	33
Section 4.21.	Foreign Corrupt Practices and International Trade Sanctions	33

 

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ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT		33
Section 5.01.	Organization and Qualification	33
Section 5.02.	Capitalization	33
Section 5.03.	Subsidiaries	34
Section 5.04.	Authority; Non-Contravention; Approvals	34
Section 5.05.	Reports and Financial Statements	35
Section 5.06.	Absence of Undisclosed Liabilities	36
Section 5.07.	Litigation	36
Section 5.08.	Absence of Certain Changes or Events	36
Section 5.09.	Registration Statement, Etc	36
Section 5.10.	Compliance with Applicable Law; Permits	36
Section 5.11.	Environmental Matters	37
Section 5.12.	Intellectual Property	37
Section 5.13.	Regulatory Compliance	39
Section 5.14.	Brokers and Finders	40
Section 5.15.	Financing	40
Section 5.16.	Interim Operations of Merger Sub	40
Section 5.17.	Taxes	40
ARTICLE VI COVENANTS		40
Section 6.01.	Conduct of Business by the Company Pending the Closing	40
Section 6.02.	Conduct of Business by Parent Pending the Closing	43
Section 6.03.	No Solicitation by the Company	44
Section 6.04.	Access to Information; Confidentiality	45
Section 6.05.	Employee Benefits	46
Section 6.06.	Registration Statement; Offer Documents; Information Statement; Listing of Shares	47
Section 6.07.	Section 16 Matters	48
Section 6.08.	Public Announcements	48
Section 6.09.	Expenses and Fees	49
Section 6.10.	Agreement to Cooperate	50
Section 6.11.	Directors’ and Officers’ Indemnification	52
Section 6.12.	Rule 145	53
Section 6.13.	Tax Free Reorganization	53
Section 6.14.	Stockholder Litigation	53
Section 6.15.	Control of Other Party’s Business	54
Section 6.16.	Rights Agreements	54
Section 6.17.	Financing; Guarantee of Parent	54
Section 6.18.	Second Merger	54
Section 6.19.	Further Assurances	55
ARTICLE VII CONDITIONS TO THE MERGER		55
Section 7.01.	Conditions to the Obligations of Each Party	55
ARTICLE VIII TERMINATION		55
Section 8.01.	Termination	55
Section 8.02.	Effect of Termination	56
ARTICLE IX MISCELLANEOUS		57
Section 9.01.	Non-Survival of Representations and Warranties	57
Section 9.02.	Notices	57

 

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Section 9.03.	Defined Terms	58
Section 9.04.	Interpretation	66
Section 9.05.	Miscellaneous	66
Section 9.06.	Counterparts	66
Section 9.07.	Amendments; Extensions	67
Section 9.08.	Entire Agreement	67
Section 9.09.	Severability	67
Section 9.10.	Specific Performance	67
Section 9.11.	Disclosure	67
EXHIBITS AND ANNEXES
EXHIBIT A — Form of Affiliate Letter
ANNEX A — Conditions to the Offer

 

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AGREEMENT AND PLAN OF MERGER

 

AGREEMENT AND PLAN OF MERGER, dated as of December 20, 2005 (this “ Agreement ”), by and among Allergan, Inc., a Delaware corporation (“ Parent ”), Banner Acquisition, Inc., a Delaware corporation and wholly-owned subsidiary of Parent (“ Merger Sub ”), and Inamed Corporation, a Delaware corporation (the “ Company ”).

 

WHEREAS, on November 21, 2005, Merger Sub commenced an offer to purchase or exchange (the “ Offer ”) any and all of the outstanding shares of the common stock, par value $0.01 per share, of the Company (together with the associated Company Rights, as defined in Section 3.01(f), the “ Shares ”), on the terms and subject to the conditions set forth in the Offer to Purchase dated November 21, 2005 and in the related letter of election and transmittal;

 

WHEREAS, pursuant to the Offer, each Share accepted for purchase or exchange will be exchanged for the right to receive, at the election of the holder of such Shares: (a) the Cash Consideration (as defined below) or (b) the Parent Stock Consideration (as defined below) plus cash in respect of fractional shares of Parent Stock (as defined below) in accordance with Section 1.01(f), and in each case subject to proration as described in Section 1.01(d);

 

WHEREAS, the Agreement and Plan of Merger by and among Medicis Pharmaceutical Corporation (“ Medicis ”), Masterpiece Acquisition Corp. and the Company, dated as of March 20, 2005 (the “ Medicis Agreement ”), has been terminated pursuant to a Merger Termination Agreement entered into as of December 13, 2005 by and among Medicis, Masterpiece Acquisition Corp. and the Company;

 

WHEREAS, the Board of Directors of Parent (the “ Parent Board ”), the Board of Directors of Merger Sub (the “ Merger Sub Board ”), and the Board of Directors of the Company (the “ Company Board ”), have approved the acquisition of the Company pursuant to the Offer, the subsequent merger of Merger Sub with and into the Company (the “ Merger ”), and the Second Merger (as defined below) upon the terms and subject to the conditions of this Agreement and in accordance with the Delaware General Corporation Law (the “ DGCL ”);

 

WHEREAS, as soon as practicable following the Merger, Parent shall, and shall cause the Surviving Corporation (as defined in Section 2.01) to, adopt an agreement and plan of merger and reorganization whereby the Company will be merged with and into a wholly-owned limited liability company subsidiary of Parent (the “ Second Merger ”), with such limited liability company surviving the Second Merger as a wholly-owned subsidiary of Parent;

 

WHEREAS, the Merger Sub Board has determined the Offer, the Merger and the Second Merger to be advisable;

 

WHEREAS, (a) the Company Board unanimously has resolved and agreed to recommend acceptance of the Offer to the holders of the Shares and (b) the Company Board unanimously (i) has determined the Offer, the Merger, and the Second Merger to be advisable, fair to and in the best interests of the stockholders of the Company, and (ii) has resolved, in the event that a meeting of the Company’s stockholders is required by Law to approve the Merger, to recommend the approval and adoption of this Agreement to the stockholders of the Company;

 

WHEREAS, Parent, Merger Sub and the Company desire to make certain representations, warranties, covenants and agreements in connection with the Offer and the Merger;

 

WHEREAS, Parent, Merger Sub and the Company intend for federal income tax purposes that the Offer, taken together with the Merger and the Second Merger (collectively, the “ Reorganization ”), qualify as a “reorganization” described in Section 368(a) of the Internal Revenue Code of 1986, as amended (the “ Code ”), and that this Agreement constitute a “plan of reorganization” within the meaning of section 1.368-2(g) of the regulations promulgated under the Code; and

 

 

WHEREAS, certain capitalized terms used herein are defined in Section 9.03;

 

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth in this Agreement and intending to be legally bound hereby, the parties hereto agree as follows:

 

ARTICLE I

 

THE OFFER

 

Section 1.01.                              The Offer .

 

(a)                                   On November 21, 2005, Parent caused Merger Sub to commence (within the meaning of Rule 14d-2 promulgated under the Exchange Act) the Offer.  In the Offer, each Share accepted by Merger Sub in accordance with the terms and subject to the conditions of the Offer shall be exchanged for the right to receive from Merger Sub, at the election of the holder: (i) $84.00 in cash, without interest (the “ Cash Consideration ”), or (ii) 0.8498 of a share of common stock, par value $0.01 per share, of Parent (together with the Parent Rights, as defined in Section 3.01(f), the “ Parent Stock ”, and such fraction of a share of Parent Stock issuable in exchange for each Share pursuant to the Offer, the “ Parent Stock Consideration ”), with cash in respect of fractional shares of Parent Stock in accordance with Section 1.01(f), and in each case subject to proration as set forth in Section 1.01(d).

 

(b)                                  The obligation of Merger Sub to accept for payment or exchange, and to pay for or exchange Shares pursuant to the Offer, shall be subject only to the Minimum Condition (as defined in Annex A hereto) and to the other conditions set forth in Annex A attached hereto.  Merger Sub expressly reserves the right to increase the consideration payable pursuant to the Offer and to waive any condition of the Offer, provided that the conditions described in clauses (c)(i) and (d)(i) – (iii) of Annex A attached shall not be waivable.  Subject to the extension rights described in subparagraph (h) below, Merger Sub shall, and Parent shall cause Merger Sub to, accept for payment or exchange, all Shares which have been validly tendered and not withdrawn pursuant to the Offer at the earliest time following the Expiration Date (as defined in subparagraph (h)) at which all conditions to the Offer shall have been satisfied or waived by Merger Sub, and Merger Sub shall not otherwise extend the Offer.  The Company agrees that no Shares held by the Company or any of its Subsidiaries will be tendered in the Offer.  Without the consent of the Company, Merger Sub shall not (i) reduce the number of Shares subject to the Offer, (ii) reduce the Cash Consideration or Parent Stock Consideration, (iii) waive or change the Minimum Condition, (iv) add to the conditions set forth in Annex A , (v) modify any condition set forth in Annex A or amend any term of the Offer set forth in this Agreement, in each case, in any manner materially adverse to the holders of Shares, or (vi)  change the form of consideration.

 

(c)                                   Subject to Sections 1.01(d), (e) and (f), each holder of Shares shall be entitled to elect (i) the number of Shares which such holder desires to exchange for the right to receive the Cash Consideration (a “ Cash Election ”), and (ii) the number of Shares which such holder desires to exchange for the right to receive Parent Stock Consideration (a “ Parent Stock Election ”).  Any Cash Election or Parent Stock Election shall be referred to herein as an “ Election ,” and shall be made on a form furnished by Merger Sub for that purpose (a “ Form of Election ”), included as part of the letter of election and transmittal accompanying the Offer.  Holders of record who hold Shares as nominees, trustees or in other representative capacities may submit multiple Forms of Election on behalf of their respective beneficial holders.

 

(d)                                  The maximum aggregate amount of cash payable pursuant to the Offer shall be (x) $84.00 multiplied by (y) 45% of the total number of Shares outstanding that are tendered and accepted for purchase pursuant to the Offer (such amount, the “ Maximum Cash Consideration ”).  The maximum aggregate amount of Parent Stock Consideration issuable pursuant to the Offer shall be (x) 0.8498 shares of Parent Stock multiplied by (y) 55% of the total number of Shares outstanding that are tendered and accepted for exchange pursuant to the Offer (such amount or any lesser amount specified in accordance with Section 1.01(e) being referred to as the “ Maximum Parent Stock Consideration ”).

 

(i)                                      If the total number of Cash Elections would require aggregate cash payments in excess of the Maximum Cash Consideration, such Elections shall be subject to proration as follows.  For

 

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each Cash Election, the number of Shares that shall be converted into the right to receive the Cash Consideration shall be (A) the total number of Shares subject to such Cash Election multiplied by (B) the Cash Proration Factor, rounded down to the nearest Share.  The “ Cash Proration Factor ” means a fraction (x) the numerator of which shall be the Maximum Cash Consideration and (y) the denominator of which shall be the product of the aggregate number of Shares subject to all Cash Elections made by all holders of Shares, multiplied by the Cash Consideration.  All Shares subject to a Cash Election, other than Shares converted into the right to receive the Cash Consideration in accordance with this Section 1.01(d), shall be converted into the right to receive the Parent Stock Consideration.  All prorations resulting from this Section 1.01(d) shall be applied on a pro rata basis, such that each Company stockholder who tenders Shares subject to a Cash Election bears its proportionate share of the proration, based on the percentage of the total Shares tendered subject to a Cash Election tendered by such Company stockholder.

 

(ii)                                   If the total number of Parent Stock Elections would require the issuance in the aggregate of a number of shares of Parent Stock in excess of the Maximum Parent Stock Consideration, such Elections shall be subject to proration as follows.  For each Parent Stock Election, the number of Shares that shall be converted into the right to receive the Parent Stock Consideration shall be (i) the total number of Shares subject to such Parent Stock Election multiplied by (ii) the Parent Stock Proration Factor, rounded down to the nearest Share.  The “ Parent Stock Proration Factor ” means a fraction (x) the numerator of which shall be the Maximum Parent Stock Consideration and (y) the denominator of which shall be the product of the aggregate number of Shares subject to all Parent Stock Elections made by all holders of Shares, multiplied by the Parent Stock Consideration.  All Shares subject to a Parent Stock Election, other than that number converted into the right to receive the Parent Stock Consideration in accordance with this Section 1.01(d), shall be converted into the right to receive the Cash Consideration.  All prorations resulting from this Section 1.01(d) shall be applied on a pro rata basis, such that each Company stockholder who tenders subject to a Parent Stock Election bears its proportionate share of the proration, based on the percentage of the total Shares tendered subject to a Parent Stock Election tendered by such Company stockholder.

 

(e)                                   Each Share validly tendered but which is not the subject of a valid Election shall be deemed to be tendered subject to the following Elections:

 

(i)                                      If the Cash Elections exceed the Maximum Cash Consideration such that proration of Cash Elections occur, Shares validly tendered without a valid Election will be deemed tendered subject to a Parent Stock Election;

 

(ii)                                   If the Parent Stock Elections exceed the Maximum Parent Stock Consideration such that proration of Parent Stock Elections occurs, Shares validly tendered without a valid Election will be deemed tendered subject to a Cash Election; and

 

(iii)                                If no proration occurs, Shares validly tendered without a valid Election will be deemed tendered in part subject to a Cash Election and in part subject to a Parent Stock Election to the extent of the Cash Consideration and Parent Stock Consideration remaining after taking into account the Cash Elections and Stock Elections made by those Company stockholders who affirmatively made Elections in the Offer.   The remaining available Cash Consideration and Parent Stock Consideration will be allocated on a pro rata basis among the Shares tendered by those Company stockholders who validly tendered Shares but did not specify an Election, such that each such Share is exchanged for the same proportion of Cash Consideration and Parent Stock Consideration, based on the respective percentages of available Cash Consideration and Parent Stock Consideration remaining after taking into account the affirmative Elections of the tendering Company stockholders.

 

(f)                                     In lieu of any fractional share of Parent Stock that otherwise would be issuable pursuant to the Offer, each holder of Shares who otherwise would be entitled to receive a fraction of a share of Parent Stock pursuant to the Offer will be paid an amount in cash (without interest) equal to such holder’s respective proportionate interest in the proceeds from the sale or sales in the open market by the Exchange Agent for the Offer, on behalf of all such holders, of the aggregate fractional shares of Parent Stock issued pursuant to the Offer.  As soon as practicable following the completion of the Offer, the Exchange Agent shall determine the excess of (i) the

 

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number of whole shares of Parent Stock issuable to the former holders of Shares pursuant to the Offer including fractional shares, over (ii) the aggregate number of whole shares of Parent Stock to be distributed to former holders of Shares (such excess being collectively called the “ Excess Offer Parent Stock ”).  The Exchange Agent, as agent and trustee for the former holders of Shares, shall as promptly as reasonably practicable sell the Excess Offer Parent Stock at the prevailing prices on the NYSE.  The sales of the Excess Offer Parent Stock by the Exchange Agent shall be executed on the NYSE through one or more member firms of the NYSE and shall be executed in round lots to the extent practicable.  Parent shall pay all commissions, transfer taxes and other out-of-pocket transaction costs, including the expenses and compensation of the Exchange Agent and costs associated with calculating and distributing the respective cash amounts payable to the applicable former holders of Shares, incurred in connection with such sales of Excess Offer Parent Stock.  Until the proceeds of such sales have been distributed to the former holders of Shares to whom fractional shares of Parent Stock otherwise would have been issued in the Offer, the Exchange Agent will hold such proceeds in trust for such former holders.  As soon as practicable after the determination of the amount of cash to be paid to former holders of Shares in respect of any fractional shares of Parent Stock, the Exchange Agent shall distribute such amounts to such former holders.

 

(g)                                  If, between the date of this Agreement and the completion of the Offer, the outstanding shares of Parent Stock or the Shares shall have been changed into, or exchanged for, a different number of shares or a different class, by reason of any stock dividend, subdivision, reclassification, recapitalization, split, combination or exchange of shares, the Cash Consideration, the Parent Stock Consideration, the Maximum Cash Consideration, the Maximum Parent Stock Consideration, the Cash Proration Factor and the Parent Stock Proration Factor shall be correspondingly adjusted as appropriate to provide the holders of Shares tendered pursuant to the Offer the same economic effect as contemplated by this Agreement prior to such event.

 

(h)                                  Subject to the terms and conditions thereof, the Offer shall remain open until at least 5:00 p.m., New York City time, on January 9, 2006 (the “ Expiration Date ,” unless extended, in which case any expiration time and date established pursuant to an authorized extension of the Offer, the “ Expiration Date ”); provided , however , that Merger Sub:

 

(i)                                      shall, and Parent shall cause Merger Sub to, from time to time extend the Offer, in increments of no more than ten (10) Business Days each, if at the initial or any subsequent scheduled Expiration Date any of the conditions of the Offer shall not have been satisfied or waived, until such time as such conditions are satisfied or waived to the extent permitted by this Agreement;

 

(ii)                                   shall, and Parent shall cause Merger Sub to, extend the Offer for any period required by any rule, regulation, interpretation or position of the SEC or the staff thereof applicable to the Offer; and

 

(iii)                                may extend the Offer one time only for up to five (5) Business Days if less than 90% of the total Shares on a fully diluted basis have been validly tendered and not properly withdrawn at the otherwise scheduled Expiration Date.

 

In each of the above cases, Parent shall cause Merger Sub to extend the Offer from time to time in accordance with this Section 1.1(h) for the shortest time periods which it reasonably believes are necessary until consummation of the Offer if the conditions of the Offer shall not have been satisfied or waived, so long as this Agreement shall not have been terminated in accordance with Article VIII hereof.

 

(i)                                      As promptly as practicable after the date of this Agreement, Parent and Merger Sub shall (i) amend or supplement (x) the Tender Offer Statement on Schedule TO with respect to the Offer (together with any amendments or supplements thereto, the “ Schedule TO ”) and (y) the registration statement on Form S-4 with respect to the offer and sale of Parent Stock pursuant to the Offer and the Merger (together with any amendments or supplements thereto, the “ Registration Statement ”), in each case as originally filed with the SEC on November 21, 2005, and in each case so as to reflect the terms and conditions of this Agreement, and file such amendments or supplements with the SEC, and (ii) cause the Offer Documents (as defined below) to be disseminated to the holders of Shares, in each case, to the extent required by applicable law.  The Schedule TO as so amended or supplemented shall contain an amended Offer to Exchange reflecting the terms and conditions of this Agreement, and a revised form of letter of transmittal and election (collectively with the Prospectus, and together with any amendments or

 

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supplements thereto, the “ Offer Documents ”), and the Registration Statement as so amended or supplemented shall include a prospectus (the “ Prospectus ”) containing the information required under the Exchange Act.  Parent shall cause the Schedule TO and the Registration Statement to comply in all material respects with the provisions of applicable federal securities laws and, on the date filed with the SEC and on the date first published, sent or given to the Company’s stockholders, to not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no representation is made by Parent with respect to information supplied by the Company in writing for inclusion in the Schedule TO or the Registration Statement.  The Company shall promptly furnish to each of Parent and Merger Sub all information concerning the Company that is required or reasonably requested by either Parent or Merger Sub in connection with such actions.  The Company, Parent and Merger Sub each agrees promptly to correct any information provided by it for use in the Schedule TO or Registration Statement if and to the extent that it shall have become false or misleading in any material respect, and Parent and Merger Sub further agree to take all steps necessary to cause the Schedule TO and Registration Statement as so corrected to be filed with the SEC and disseminated to the holders of the Shares, in each case as and to the extent required by applicable federal securities laws.  Parent and Merger Sub further agree to promptly advise the Company of any comments or other communications (and promptly provide copies of any such written materials or reasonably detailed summaries of any oral communications) that Parent or Merger Sub or their counsel or representatives may receive from the SEC or its staff with respect to the Schedule TO or Registration Statement or any other securities filings of Parent or Merger Sub related to the Offer, the Merger or the transactions contemplated hereby or thereby.

 

(j)                                      Parent and Merger Sub shall comply with the obligations respecting prompt payment and announcement under the Exchange Act, and, without limiting the generality of the foregoing, Merger Sub shall, and Parent shall cause Merger Sub to, accept for payment, and pay for, all Shares validly tendered and not withdrawn pursuant to the Offer promptly following the acceptance of such Shares for payment pursuant to the Offer and this Agreement.  Parent shall provide or cause to be provided to Merger Sub on a timely basis all funds and shares of Parent Stock necessary to purchase or exchange any Shares that Merger Sub becomes obligated to purchase or exchange pursuant to the Offer.

 

Section 1.02.                              Company Action.

 

(a)                                   The Company hereby approves of and consents to the Offer and represents and warrants that at meetings duly called and held on December 13 and 14, 2005, the Company Board unanimously (i) determined that the Offer, and this Agreement and the transactions contemplated thereby and hereby (including the Merger and the Second Merger) are advisable, fair to and in the best interests of the Company stockholders, (ii) approved and adopted this Agreement and the transactions contemplated hereby, including the Offer, the Merger, and the Second Merger in all respects in accordance with Delaware law, and such approval constitutes approval of the Offer, this Agreement and the Merger for all purposes of Section 203 of the DGCL (as described in Section 4.04(b)), (iii) approved and adopted an amendment to the terms of the Company Rights Agreement (as defined in Section 3.01(f)) and took all other actions necessary to render the Company Rights Agreement inapplicable to Parent, Merger Sub, the Offer, this Agreement and the Merger (such action, collectively, the “ Rights Plan Amendment ”), and (iv) resolved to recommend that the stockholders of the Company tender their Shares to Merger Sub pursuant to the Offer and that the stockholders of the Company adopt and approve this Agreement and the Merger if stockholder approval is required by the DGCL; provided , however , that such recommendation may be withdrawn, modified or amended if permitted by Section 6.03 and subject to the payment of any applicable fees resulting from such action as provided in Section 6.09.  The Company consents to the inclusion of such recommendations and approvals in the Offer Documents and in the Information Statement.

 

(b)                                  (i) As promptly as practicable after the date of this Agreement, the Company shall file with the SEC an amendment to its Solicitation/Recommendation Statement on Schedule 14D-9 originally filed on December 5, 2005, with respect to the Offer, reflecting the Company Board’s recommendation that the Company’s stockholders accept and tender Shares pursuant to the Offer, the Company Board’s approval of this Agreement and otherwise reflecting the terms and conditions of this Agreement and including the information regarding Parent’s designees to the Company Board pursuant to Section 1.03 to the extent Parent shall have theretofore provided the information required by Section 1.03(b) (such Schedule 14D-9, as amended or supplemented from time to time, the “ Schedule 14D-9 ”), (ii) if (x) following the completion of the Offer and any exercise of the Top-Up Option,

 

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consummation of the Merger under Section 253 of the DGCL as contemplated by Section 1.05 is not permitted by the terms of Section 253 of the DGCL and (y) Parent delivers to the Company a written consent of the holders of Shares in accordance with Section 228 of the DGCL duly adopting this Agreement under Section 251 of the DGCL and so requests, the Company shall as promptly as reasonably practicable file with the SEC an Information Statement on Schedule 14C (as amended or supplemented from time to time, the “ Information Statement ”), describing the Merger and the Second Merger and including such information regarding Parent, Merger Sub, the Company and the terms and approval of such transactions as is required by such form and under applicable Law, and (iii) shall disseminate the Schedule 14D-9 and the Information Statement to the holders of Shares at the times and to the extent required by applicable Laws.  The Schedule 14D-9 (including the information regarding Parent’s designees to the Company Board) and the Information Statement will comply in all material respects with the provisions of applicable federal securities laws and, on the date filed with the SEC and on the date first published, sent or given to the Company’s stockholders, shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no representation is made by the Company with respect to information supplied by Parent or Merger Sub in writing for inclusion in the Schedule 14D-9 or the Information Statement.  Each of Parent and Merger Sub shall promptly furnish to the Company all information concerning Parent and Merger Sub that is required or reasonably requested by the Company in connection with such actions.  The Company, Parent and Merger Sub each agrees promptly to correct any information provided by it for use in the Schedule 14D-9 or the Information Statement if and to the extent that it shall have become false or misleading in any material respect, and the Company further agrees to take all steps necessary to cause the Schedule 14D-9 and the Information Statement as so corrected to be filed with the SEC and disseminated to the holders of the Shares, in each case as and to the extent required by applicable Laws.  The Company further agrees to promptly advise Parent of any comments or other communications (and promptly provide copies of any such written materials or reasonably detailed summaries of any oral communications) that the Company or its counsel or representatives may receive from the SEC or its staff with respect to the Schedule 14D-9 or any other securities filings of the Company related to the Offer, the Merger or the transactions contemplated hereby or thereby.

 

(c)                                   In connection with the Offer and the mailing of the Offer Documents and the Information Statement, the Company will promptly furnish Parent and Merger Sub with mailing labels, security position listings and any available listing or computer files containing the names and addresses of the record holders of the Shares as of the most recent date practicable and shall furnish Merger Sub with such additional information and assistance (including, without limitation, updated stockholder lists, mailing labels and lists of securities positions) as Merger Sub or its agents may reasonably request in communicating the Offer or the matters subject to the Company Stockholder Approval (as defined in Section 4.04(a)) to the record and beneficial holders of Shares.  Except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Offer, the Merger or the Second Merger, Parent, Merger Sub and their respective affiliates, associates, agents and advisors shall use the information contained in any such labels, listings and files only in connection with the Offer and the Merger, and, if this Agreement shall be terminated, will deliver to the Company all copies of such information then in their possession promptly upon the request of the Company.

 

Section 1.03.                              Board of Directors and Committees; Section 14(f) .

 

(a)                                   Promptly upon the purchase by Merger Sub of Shares pursuant to the Offer and from time to time thereafter, and subject to the last sentence of this Section 1.03(a), Parent shall be entitled to designate up to such number of directors, rounded to the nearest whole number, constituting at least a majority of the directors, on the Company Board as will give Parent representation on the Company Board equal to the product of the number of directors on the Company Board (giving effect to any increase in the number of directors pursuant to this Section 1.03) and the percentage that the number of Shares beneficially owned by Parent and Merger Sub bears to the total number of outstanding Shares, and the Company shall use all reasonable efforts to, upon request by Parent, promptly, at the Company’s election, either increase the size of the Company Board or secure the resignation of such number of directors as is necessary to enable Parent’s designees to be elected or appointed to the Company Board and to cause Parent’s designees to be so elected or appointed.  At such times, the Company will use its best efforts to cause persons designated by Parent to constitute a majority of each committee of the Company Board, other than any committee of the Company Board, if any, established to take action under this Agreement.  Notwithstanding the foregoing, the Company shall use all reasonable efforts to ensure that three of the members of

 

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the Company Board as of the date hereof shall remain members of the Company Board until the Effective Time (as defined in Section 2.02 hereof).  If the number of directors who are members of the Company Board as of the date hereof is reduced below three prior to the Effective Time, the remaining directors who are members of the Company Board as of the date hereof or their designees (or if there is only one such director, that remaining director) shall be entitled to designate a person (or persons) to fill such vacancy (or vacancies).

 

(b)                                  The Company’s obligation to appoint designees to the Company Board shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder.  Subject to the Parent’s compliance with the final sentence of this Section 1.03(b), the Company shall promptly take all actions, including filing an amendment to the Schedule 14D-9 (and disseminating such amendment to the stockholders of the Company to the extent required by applicable Laws) containing such information with respect to the Company and its officers and directors and Parent’s designees as Section 14(f) and Rule 14f-1 require, in order to fulfill its obligations under this Section. Parent shall timely supply to the Company in writing and be solely responsible for any information with respect to itself and its nominees, officers, directors and affiliates required by Section 14(f) and Rule 14f-1.

 

(c)                                   Following the election or appointment of Parent’s designees pursuant to this Section 1.03 and prior to the Effective Time, if there shall be any directors of the Company who were directors as of the date hereof, any amendment of this Agreement, any termination of this Agreement by the Company, any extension by the Company of the time for the performance of any of the obligations or other acts of Parent or Merger Sub or waiver of any of the Company’s rights hereunder or other action adversely affecting the rights of stockholders of the Company (other than Parent or Merger Sub), will require the concurrence of a majority of such directors.

 

Section 1.04.                              Top-Up Option .

 

(a)                                   Subject to the terms and conditions herein, the Company hereby grants to Merger Sub an irrevocable option (the “ Top-Up Option ”) to purchase up to that number of Shares (the “ Top-Up Option Shares ”) equal to the lowest number of Shares that, when added to the number of Shares collectively owned by Parent, Merger Sub and any of Parent’s other Subsidiaries immediately following consummation of the Offer shall constitute 90% of the Shares then outstanding (on a fully diluted basis, after giving effect to the issuance of the Top-Up Option Shares) at a purchase price per Top-Up Option Share equal to the Cash Consideration.  Notwithstanding the foregoing provisions of this Section 1.04(a), the Top-Up Option shall not be exercisable if the aggregate number of Shares issuable upon exercise of the Top-Up Option, plus the aggregate number of then-outstanding Shares, plus the aggregate number of Shares issuable upon exercise of all options and other rights to purchase Shares, plus the aggregate number of shares reserved for issuance pursuant to the Company Stock Plans would exceed the number of authorized Shares.

 

(b)                                  The Top-Up Option may be exercised in whole, but not in part, at any one time after the occurrence of a Top-Up Exercise Event and prior to the occurrence of a Top-Up Termination Event.

 

(i)                                      A “ Top-Up Exercise Event ” shall occur upon Merger Sub’s acceptance for payment pursuant to the Offer of Shares constituting, together with Shares owned directly or indirectly by Parent or any other Subsidiaries of Parent, at least 80 percent, but less than 90 percent, of the Shares then outstanding.

 

(ii)                                   The “ Top-Up Termination Date ” shall occur upon the earliest to occur of (A) the Effective Time, (B) the termination of this Agreement, (C) the date that is ten (10) Business Days after the occurrence of a Top-Up Exercise Event, unless the Top-Up Option has been previously exercised in accordance with the terms and conditions hereof and (D) the date that is ten (10) Business Days after the Top-Up Notice Date unless the Top-Up Closing shall have previously occurred.

 

(c)                                   To exercise the Top-Up Option, Merger Sub shall send to the Company a written notice (a “ Top-Up Exercise Notice ”, and the date of receipt of which notice is referred to herein as the “ Top-Up Notice Date ”) specifying the place for the closing of the purchase and sale of shares of Shares pursuant to the Top-Up Option (the “ Top-Up Closing ”) and a date not earlier than one (1) Business Day nor later than ten (10) Business Days after the Top-Up Notice Date for the Top-Up Closing.  The Company shall, promptly after receipt of the Top-

 

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Up Exercise Notice, deliver a written notice to Merger Sub confirming the number of Top-Up Option Shares and the aggregate purchase price therefor.

 

(d)                                  At the Top-Up Closing, subject to the terms and conditions of this Agreement, (i) the Company shall deliver to Merger Sub a certificate or certificates evidencing the applicable number of Top-Up Option Shares, provided that the obligation of the Company to deliver Top-Up Option Shares upon the exercise of the Top-Up Option is subject to the condition that no provision of any applicable Law or judgment shall prohibit the exercise of the Top-Up Option or the delivery of the Top-Up Option Shares in respect of any such exercise and (ii) Merger Sub shall purchase each Top-Up Option Share from the Company at a purchase price per Top-Up Option Share equal to the Cash Consideration.  Payment by Merger Sub of the purchase price for the Top-Up Option Shares may be made, at Merger Sub’s option, by delivery of (A) immediately available funds by wire transfer to an account designated by the Company, (B) a demand note issued by Merger Sub in customary form that is reasonably acceptable to the parties, (C) shares of Parent Stock (valued based on the average closing price per share of Parent Stock over the five (5) consecutive trading days ending on and including the second full trading day preceding the Top-Up Closing), or (D) any combination thereof.  Any demand note issued pursuant to the preceding sentence shall be accompanied by a credit support arrangement reasonably acceptable to the parties hereto.

 

(e)                                   Upon the delivery by Merger Sub to the Company of the Top-Up Exercise Notice, and the tender of the consideration described in Section 1.04(d), Merger Sub shall be deemed to be the holder of record of the Top-Up Option Shares issuable upon that exercise, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing those Top-Up Option Shares shall not then be actually delivered to Merger Sub or the Company shall have failed or refused to designate the bank account described in Section 1.04(d).

 

(f)                                     Certificates evidencing Top-Up Option Shares delivered hereunder may include any legends legally required, including a legend in substantially the following form:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.

 

(g)                                  In the event Merger Sub exercises the Top-Up Option, the Company shall deliver to the Exchange Agent promptly after the Effective Time an amount of cash equal to the lesser of (i) the aggregate amount of cash paid by Merger Sub for the Top-Up Option Shares and (ii) the Maximum Cash Merger Consideration, and the Exchange Agent shall use such cash to pay the Cash Merger Consideration payable pursuant to Section 3.01 (the excess, if any, of (i) over (ii) shall be referred to as the “ Excess Cash Amount ”).  For purposes of this Agreement, any cash paid to Company stockholders pursuant to the Merger as contemplated by the preceding sentence shall be deemed to be Cash Merger Consideration, and any cash payable to holders of Dissenting Shares pursuant to Section 3.02 shall first be paid from the Excess Cash Amount.

 

Section 1.05.                              Short Form Merger .  If, after the consummation of the Offer and any exercise of the Top-Up Option, the number of Shares beneficially owned by Parent, Merger Sub and Parent’s other Subsidiaries collectively represent at least 90% of the then outstanding Shares, Parent shall cause Merger Sub to, and the Company shall execute and deliver such documents and instruments and take such other actions as Parent or Merger Sub may request, in order to cause the Merger to be completed as promptly as reasonably practicable as provided in Section 253 of the DGCL, and otherwise as provided in Article II below.

 

ARTICLE II

 

THE MERGER

 

Section 2.01.                              The Merger .  Upon the terms and subject to the satisfaction or waiver of the conditions set forth in this Agreement, and in accordance with the DGCL, Merger Sub shall be merged with and into the Company at the Effective Time.  Following the Effective Time, the separate corporate existence of Merger Sub

 

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shall cease and the Company shall continue as the corporation surviving the Merger (the “ Surviving Corporation ”), until the Second Merger becomes effective.

 

Section 2.02.                              Closing .  The closing of the Merger (the “ Closing ”) shall take place on the second Business Day after the satisfaction or waiver (subject to applicable Law) of the conditions set forth in Article VII (excluding conditions that, by their nature, cannot be satisfied until the Closing Date, but subject to the satisfaction or, to the extent provided by Law and this Agreement, waiver of those conditions), unless this Agreement has been terminated pursuant to its terms or unless another time or date is agreed to in writing by the parties hereto (the actual date of the Closing being referred to herein as the “ Closing Date ”).  The Closing shall be held at the offices of Gibson, Dunn & Crutcher LLP, at 4 Park Plaza, Irvine, California, 92614, unless another place is agreed to in writing by the parties hereto.  Subject to the provisions of this Agreement, as soon as practicable on the Closing Date, the parties shall file a certificate of merger or certificate of ownership and merger, as the case may be (the “ Certificate of Merger ”) executed in accordance with the relevant provisions of the DGCL and shall make all other filings or recordings required under the DGCL.  The Merger shall become effective at such time as the Certificate of Merger is duly filed with and accepted by the Secretary of State of the State of Delaware, or at such later time as Parent and the Company shall agree and specify in the Certificate of Merger (the time the Merger becomes effective being the “ Effective Time ”).

 

Section 2.03.                              Effect of the Merger .  At the Effective Time, the effect of the Merger shall be as provided in the applicable provisions of the DGCL.  Without limiting the generality of the foregoing, at the Effective Time, except as otherwise provided herein, 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 2.04.                              Certificate of Incorporation of the Surviving Corporation .  At the Effective Time, the certificate of incorporation of the Surviving Corporation shall be amended to read the same as the certificate of incorporation of Merger Sub, as in effect immediately prior to the Effective Time, and shall be the certificate of incorporation of the Surviving Corporation until thereafter changed or amended as provided therein, by the DGCL or by applicable Law, except that Article I of the certificate of incorporation of the Surviving Corporation shall be amended and restated in its entirety to read as follows:  “The name of the corporation shall be Inamed Corporation.”

 

Section 2.05.                              Bylaws of the Surviving Corporation .  At the Effective Time, the bylaws of the Surviving Corporation shall be amended to read the same as the bylaws of Merger Sub, as in effect immediately prior to the Effective Time, and shall be the bylaws of the Surviving Corporation, until amended as provided therein, by the DGCL or by applicable Law.

 

Section 2.06.                              Directors and Officers of the Surviving Corporation .

 

(a)                                   The directors of Merger Sub immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation and shall hold office from the Effective Time until their respective successors are duly elected or appointed and qualified in the manner provided in the certificate of incorporation or bylaws of the Surviving Corporation or as otherwise provided by Law.

 

(b)                                  The officers of Merger Sub immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation and shall hold office from the Effective Time until their respective successors are duly elected or appointed and qualified in the manner provided in the certificate of incorporation or bylaws of the Surviving Corporation or as otherwise provided by Law.

 

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ARTICLE III

 

EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES

 

Section 3.01.                              Conversion of Securities .

 

(a)                                   At the Effective Time, by virtue of the Merger and without any action on the part of the Company, Parent, Merger Sub or any holder of any Shares or any capital stock of Merger Sub:

 

(i)                                      Subject to this Article III, each Share issued and outstanding immediately prior to the Effective Time (other than Shares to be cancelled in accordance with Section 3.01(a)(ii) and Dissenting Shares referred to in Section 3.02) shall be converted into the right to receive, at the election of the holder, (A) $84.00 in cash, without interest but subject to proration as described below (the “ Cash Merger Consideration ” ) or (B) 0.8498 shares of Parent Stock (the “ Stock Merger Consideration ” and, together with the Cash Merger Consideration, the “ Merger Consideration ” ), subject to proration as described below, payable upon the surrender of the Certificates (as defined in Section 3.03(b)).  From and after the Effective Time, all such Shares shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and each holder of a Certificate representing any such Shares shall cease to have any rights with respect thereto, except the right to receive, upon surrender of such Certificate in accordance with Section 3.03, the Merger Consideration pursuant to this Section 3.01(a), any cash paid in respect of fractional shares payable pursuant to Section 3.03(e) and any dividends or other distributions to which such holder is entitled pursuant to Section 3.03(c), without interest.

 

(ii)                                   All Shares that are (A) held by the Company as treasury shares or (B) owned by Parent or any wholly-owned Subsidiary of Parent, in each case, immediately prior to the Effective Time, shall be cancelled and retired and shall cease to exist, and no cash, securities of Parent or other consideration shall be delivered in exchange therefor.

 

(iii)                                Each share of common stock, par value $0.01 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one fully paid and nonassessable share of common stock, par value $0.01 per share, of the Surviving Corporation.

 

(b)                                  Subject to subparagraphs (c) through (g) below, each holder of Shares shall be entitled to elect (i) the number of Shares which such holder desires to exchange for the right to receive the Cash Merger Consideration (a “ Cash Merger Election ”), and (ii) the number of Shares which such holder desires to exchange for the right to receive Stock Merger Consideration (a “ Stock Merger Election ”).  Any Cash Merger Election or Stock Merger Election shall be referred to herein as a “ Merger Election ,” and shall be made on a form furnished by Parent for that purpose (a “ Form of Merger Election ”), which form may be part of the letter of election and transmittal delivered to former Company stockholders promptly following the Merger.  Holders of record who hold Shares as nominees, trustees or in other representative capacities may submit multiple Forms of Merger Election on behalf of their respective beneficial holders.  Any Shares as to which the holder has not submitted a properly completed Merger Election by the close of business on the Election Deadline shall be deemed to have made no Merger Election and be treated as specified in subparagraph (d)(iii) below.

 

(c)                                   The maximum aggregate amount of cash payable pursuant to the Merger shall be (x) $84.00 multiplied by (y) 45% of the total number of Shares canceled pursuant to the Merger (other than Shares canceled pursuant to Section 3.01(a)(ii)), minus the cash value of Dissenting Shares (such amount, the “ Maximum Cash Merger Consideration ”).  For purposes of this Section 3.01, the “cash value of Dissenting Shares” assumes that the fair value, or “cash value”, of each Dissenting Share equals the Cash Merger Consideration.  The maximum aggregate amount of Stock Merger Consideration issuable pursuant to the Merger shall be (x) 0.8498 shares of Parent Stock multiplied by (y) 55% of the total number of Shares canceled pursuant to the Merger (other than Shares canceled pursuant to Section 3.01(a)(ii)) (such amount, the “ Maximum Stock Merger Consideration ”).

 

(i)                                      If the total number of Cash Merger Elections would require aggregate cash in excess of the Maximum Cash Merger Consideration, such Cash Merger Elections shall be subject to

 

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proration as follows.  For each Cash Merger Election, the number of Shares that shall be converted into the right to receive the Cash Merger Consideration shall be (A) the total number of Shares subject to such Cash Merger Election, multiplied by (B) the Merger Cash Proration Factor, rounded down to the nearest Share.  The “ Merger Cash Proration Factor ” means a fraction (x) the numerator of which shall be the Maximum Cash Merger Consideration and (y) the denominator of which shall be the product of the aggregate number of Shares subject to all Cash Merger Elections made by all holders of Shares, multiplied by the Cash Merger Consideration.  All Shares subject to a Cash Merger Election, other than Shares converted into the right to receive the Cash Merger Consideration in accordance with this Section 3.01(c), shall be converted into the right to receive the Stock Merger Consideration.  All prorations resulting from this Section 3.01(c) shall be applied on a pro rata basis, such that each Company stockholder who surrenders Shares subject to a Cash Merger Election bears its proportionate share of the proration, based on the percentage of the total Shares surrendered subject to a Cash Merger Election that are surrendered by such Company stockholder, and shall be further subject to subparagraph (g) below, if applicable.

 

(ii)                                   If the total number of Stock Merger Elections would require aggregate Stock Merger Consideration in excess of the Maximum Stock Merger Consideration, such Stock Merger Elections shall be subject to proration as follows.  For each Stock Merger Election, the number of Shares that shall be converted into the right to receive the Stock Merger Consideration shall be (A) the total number of Shares subject to such Stock Merger Election multiplied by (B) the Merger Stock Proration Factor, rounded down to the nearest Share.  The “ Merger Stock Proration Factor ” means a fraction (x) the numerator of which shall be the Maximum Stock Merger Consideration and (y) the denominator of which shall be the product of the aggregate number of Shares subject to all Stock Merger Elections made by all holders of Shares multiplied by the Stock Merger Consideration.  All Shares subject to a Stock Merger Election, other than that number converted into the right to receive the Stock Merger Consideration in accordance with this Section 3.01(c), shall be converted into the right to receive the Cash Merger Consideration.  All prorations resulting from this Section 3.01(c) shall be applied on a pro rata basis, such that each Company stockholder who surrendered Shares subject to a Stock Merger Election bears its proportionate share of the proration, based on the percentage of the total Shares surrendered subject to a Stock Merger Election that are surrendered by such Company stockholder, and shall be further subject to subparagraph (g) below, if applicable.

 

(d)                                  Each Share canceled in exchange for the right to receive the Merger Consideration but which is not surrendered subject to a valid Merger Election, and any Dissenting Share as to which the holder does not validly perfect, or later waives, withdraws or loses the right to appraisal and payment under the DGCL prior to the Election Deadline, shall be deemed to be surrendered subject to the following Merger Elections:

 

(i)                                      If the Cash Merger Elections exceed the Maximum Cash Merger Consideration such that proration of Cash Merger Elections occur, Shares validly tendered without a valid Merger Election will be deemed tendered subject to a Stock Merger Election;

 

(ii)                                   If the Stock Merger Elections exceed the Maximum Stock Merger Consideration such that proration of Stock Merger Elections occurs, Shares validly tendered without a valid Election will be deemed tendered subject to a Cash Merger Election; and

 

(iii)                                If no proration occurs, Shares validly tendered without a valid Merger Election, and any Dissenting Share as to which the holder does not validly perfect, or later waives, withdraws or loses the right to appraisal and payment under the DGCL prior to the Election Deadline, will be deemed tendered in part subject to a Cash Merger Election and in part subject to a Stock Merger Election to the extent of the Cash Merger Consideration and Stock Merger Consideration remaining after taking into account the Cash Merger Elections and Stock Merger Elections made by those Company stockholders who affirmatively made Merger Elections in connection with the Merger.   The remaining available Cash Merger Consideration and Stock Merger Consideration will be allocated on a pro rata basis among the Shares tendered by those Company stockholders who validly tendered Shares but did not tender subject to a valid Merger Election, and any Dissenting Share as to which the holder does not validly perfect, or later waives, withdraws or loses the right to appraisal and payment under the DGCL prior to the Election Deadline, such that each such Share is exchanged for the same proportion of Cash Merger Consideration

 

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and Stock Merger Consideration, based on the respective percentages of available Cash Merger Consideration and Stock Merger Consideration remaining after taking into account the affirmative Merger Elections of the tendering Company stockholders.

 

(iv)                               Any Dissenting Shares as to which the holder fails to perfect or later waives, withdraws or loses the right to appraisal and payment under the DGCL after the Election Deadline shall be deemed tendered subject to a Cash Merger Election, and will remain subject to proration to the same extent as if such holder surrendered such formerly Dissenting Shares promptly following the Effective Time subject to a valid Cash Merger Election.

 

(e)                                   Change in Shares .  If, between the date of this Agreement and the Effective Time, the outstanding shares of Parent Stock or the Shares shall have been changed into, or exchanged for, a different number of shares or a different class, by reason of any stock dividend, subdivision, reclassification, recapitalization, split, combination or exchange of shares, the Cash Consideration, Parent Stock Consideration, Maximum Cash Consideration, Maximum Parent Stock Consideration, Cash Proration Factor, Parent Stock Proration Factor, Cash Merger Consideration, the Stock Merger Consideration, the Maximum Cash Merger Consideration, the Maximum Stock Merger Consideration, the Merger Cash Proration Factor, the Merger Stock Proration Factor shall be correspondingly adjusted as appropriate to provide the holders of Shares and Company Stock Options the same economic effect as contemplated by this Agreement prior to such event.

 

(f)                                     Associated Rights .  References in this Agreement to “Parent Stock” shall include, unless the context requires otherwise, the associated preferred share purchase rights ( “ Parent Rights ” ) issued pursuant to the Rights Agreement, dated as of January 25, 2000, between Parent and Wells Fargo Bank, N.A. (as successor in interest to Equiserve Trust Company, N.A. and First Chicago Trust Company of New York )(as amended prior to the Effective Time, the “ Parent Rights Agreement ” ).  References in this Agreement to “Shares” shall include, unless the context requires otherwise, the associated preferred share purchase rights ( “ Company Rights ” ) issued pursuant to the Amended and Restated Rights Agreement dated as of November 16, 1999 by and between the Company and U.S. Stock Transfer Corporation, as Rights Agent, as amended prior to the Effective Time (the “ Company Rights Agreement ” ).

 

(g)                                  Notwithstanding anything in this Agreement to the contrary, if the product of (A) the number of shares of Parent Stock to be issued in the Offer and the Merger in exchange for Shares and (B) Testing Price (as defined below) of Parent Stock as reported on the NYSE on the last Business Day before the date of the public announcement of the Offer (or other applicable valuation date under Treasury Regulation Section 1.368-1(e)(2) for purposes of testing the continuity of interest requirement under Treasury Regulation Section 1.368-1(e)) (such date the “ Valuation Date ” and such product the “ Value of Stock Consideration ” ) is less than 40% of the sum of the Value of Stock Consideration and the amount of Non-Stock Consideration (as defined below), then the amount of cash consideration to be paid in the Merger in exchange for Shares shall be reduced and the number of shares of Parent Stock issued in the Merger in exchange for Shares shall be increased pro-rata based on the cash consideration to which the Company stockholder is otherwise entitled pursuant to the Merger under this Agreement so as to cause such percentage to be equal to 40%.  The additional shares of Parent Stock to be issued in lieu of cash pursuant to the preceding sentence shall be determined using the Stock Merger Consideration.  For purposes of this paragraph, the “ Non-Stock Consideration ” shall mean (a) any cash consideration paid pursuant to the Offer and the Merger, (b) any Company Distribution, and (c) any other cash or property (other than shares of Parent Stock) that is transferred, paid or distributed by Parent (or any Person related to Parent within the meaning of Treasury Regulation Section 1.368-1(e)(3)) to holders of Shares in exchange for Shares in connection with the Offer and Merger (including any cash paid on account of dissenting shares and any payments of expenses incurred in connection with the disposition of fractional shares in the Offer and the Merger, but excluding any payment pursuant to Section 1.04(g)).  The “ Testing Price ” shall be the lowest of the following amounts: (i) the closing Parent Stock trading price on the Valuation Date, (ii) the average between the high and low Parent Stock trading price on the Valuation Date, and (iii) the volume weighted average of the trading price of all shares of Parent Stock traded on the Valuation Date.

 

Section 3.02.                              Dissenting Stockholders .  Notwithstanding anything in this Agreement to the contrary, Shares outstanding immediately prior to the Effective Time that are held by a Person who shall not have

 

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voted to adopt this Agreement and who properly exercises and perfects appraisal rights for such Shares in accordance with Section 262 of the DGCL (the “ Dissenting Shares ” ) will not be converted into a right to receive the applicable Merger Consideration as described in Section 3.01, but shall be converted into the right to receive such consideration as may be determined to be due pursuant to Section 262 of the DGCL; provided , however , that if any such holder shall fail to perfect or otherwise shall waive, withdraw or lose the right to appraisal and payment under the DGCL after the Election Deadline, the right of such holder to such appraisal of its Dissenting Shares shall cease and such Shares shall be deemed canceled and converted as of the Effective Time into the right to receive the Merger Consideration as provided in Section 3.01 to which a holder who made a Cash Merger Election would be entitled, any cash paid in respect of fractional shares payable to any such holder pursuant to Section 3.03(e) and any dividends or other distributions to which any such holder is entitled pursuant to Section 3.03(c).  The Company shall give Parent (a) prompt notice of any written demands for appraisal received by the Company, withdrawals of such demands, and any other related instruments served pursuant to Section 262 of the DGCL and received by the Company and (b) the opportunity to direct in compliance with all applicable Laws all negotiations and proceedings with respect to demands for appraisals under the DGCL; provided , that any definitive actions taken by the Company at the direction of Parent in respect of any such negotiations and proceedings may be conditioned upon occurrence of the Effective Time.  The Company shall not, except with prior written consent of Parent, (i) voluntarily make any payment with respect to any demands for appraisal for Dissenting Shares, (ii) offer to settle, or settle, any such demands, (iii) waive any failure to timely deliver a written demand for appraisal in accordance with the DGCL or (iv) agree to do any of the foregoing.

 

Section 3.03.                              Exchange of Certificates .

 

(a)                                   As of the Effective Time, Parent shall deposit, or shall cause to be deposited, with Wells Fargo Bank, N.A. or another bank or trust company designated by Parent and reasonably satisfactory to the Company (the “ Exchange Agent ” ), for the benefit of the holders of Shares, for exchange in accordance with this Article III through the Exchange Agent, (i) certificates representing a number of shares of Parent Stock equal to the Maximum Stock Merger Consideration issuable to the Company stockholders pursuant to Section 3.01 and (ii) an amount of cash sufficient to deliver to holders of Shares the Maximum Cash Merger Consideration to which they are entitled pursuant to Section 3.01.  Parent further agrees to provide to the Exchange Agent, from time to time as needed, immediately available funds sufficient to pay any dividends and other distributions pursuant to Section 3.03(c).  Any cash and certificates representing Parent Stock deposited with the Exchange Agent shall hereinafter be referred to as the “ Exchange Fund .”  Pursuant to irrevocable instructions, the Exchange Agent shall promptly deliver the Merger Consideration from the Exchange Fund to the former Company stockholders who are entitled thereto pursuant to Section 3.01.  Except as contemplated by Sections 3.03(c) and 3.03(e) hereof, the Exchange Fund shall not be used for any other purpose.

 

(b)                                  Promptly (and in any event within five (5) Business Days) after the Effective Time, Parent shall cause the Exchange Agent to mail to each holder of record of a certificate formerly representing Shares (a “ Certificate ” ), other than Parent or Merger Sub or any wholly-owned Subsidiary of Parent or Merger Sub, (i) a letter of election and transmittal (which will include the Form of Merger Election) that shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Exchange Agent, which letter shall be in customary form and (ii) instructions for effecting the surrender of such Certificates in exchange for the Merger Consideration.  Upon surrender of a Certificate to the Exchange Agent, together with such letter of election and transmittal, duly executed and completed in accordance with the instructions thereto, and such other documents as may reasonably be required by the Exchange Agent, the holder of such Certificate shall be entitled to receive in exchange therefor (A) one or more shares of Parent Stock representing, in the aggregate, the whole number of shares that such holder is entitled to receive pursuant to Section 3.01 (after taking into account any applicable proration or other adjustments and aggregating any fractional shares resulting from all Shares surrendered by such holder pursuant to the Merger), (B) the Cash Merger Consideration that such holder is entitled to receive pursuant to Section 3.01 in respect of the Shares represented by such Certificate and/or (C) a check in the amount of the cash that such holder is entitled to be paid in respect of any fractional shares of Parent Stock pursuant to Section 3.03(e) and dividends and other distributions pursuant to Section 3.03(c), if any, and the Certificate so surrendered shall forthwith be canceled.  No interest will be paid or will accrue on any cash payable pursuant to Section 3.01, Section 3.03(c) or Section 3.03(e).  In the event of a transfer of ownership of Shares which is not registered in the transfer records of the Company, the Merger Consideration may be issued and paid with respect to such Shares to such a transferee if the Certificate representing such transferred Shares is

 

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presented to the Exchange Agent in accordance with this Section 3.03(b), accompanied by all documents required to evidence and effect such transfer and evidence that any applicable stock transfer taxes have been paid.

 

(c)                                   No dividends or other distributions declared or made after the Effective Time with respect to the Parent Stock with a record date after the Effective Time shall be paid to any holder of any unsurrendered Certificate who is entitled to receive Parent Stock upon such surrender, and no cash payment in respect of fractional shares shall be paid to any such holder pursuant to Section 3.03(e), unless and until the holder of such Certificate shall surrender such Certificate in accordance with Section 3.03(b).  Subject to the effect of escheat, Tax or other applicable Laws, following surrender of any such Certificate, there shall be paid to the holder of the stock certificates representing whole shares of Parent Stock to be issued in exchange therefor, without interest, (i) promptly, (A) the amount of any cash payable pursuant to any Cash Merger Election and any cash payable with respect to a fractional share of Parent Stock to which such holder is entitled pursuant to Section 3.03(e) and (B) the amount of dividends or other distributions with a record date after the Effective Time theretofore paid with respect to such whole shares of Parent Stock and (ii) at the appropriate payment date, the amount of dividends or other distributions, with a record date after the Effective Time but prior to the date of surrender of such holder’s Certificate and a payment date occurring after the date of surrender, payable with respect to such whole shares of Parent Stock.

 

(d)                                  The Merger Consideration delivered upon surrender of Certificates in accordance with the terms hereof (including any cash paid pursuant to Section 3.03(c) or Section 3.03(e)) shall be deemed to have been paid in full satisfaction of all rights pertaining to the Shares represented by such Certificates.

 

(e)                                   In lieu of any fractional share of Parent Stock that otherwise would be issuable pursuant to the Merger, each holder of Shares who otherwise would be entitled to receive a fraction of a share of Parent Stock pursuant to the Merger will be paid an amount in cash (without interest) equal to such holder’s respective proportionate interest in the proceeds from the sale or sales in the open market by the Exchange Agent for the Merger, on behalf of all such holders, of the aggregate fractional shares of Parent Stock issued pursuant to the Merger.  As soon as practicable following the Election Deadline, the Exchange Agent shall determine the excess of (i) the number of whole shares of Parent Stock issuable to the holders of Shares pursuant to the Merger including fractional shares, over (ii) the aggregate number of whole shares of Parent Stock to be distributed to former holders of Shares pursuant to the Merger (such excess being collectively called the “ Excess Merger Parent Stock ”).  The Exchange Agent, as agent and trustee for the former holders of Shares, shall as promptly as reasonably practicable sell the Excess Merger Parent Stock at the prevailing prices on the NYSE.  The sales of the Excess Merger Parent Stock by the Exchange Agent shall be executed on the NYSE through one or more member firms of the NYSE and shall be executed in round lots to the extent practicable.  Parent shall pay all commissions, transfer taxes and other out-of-pocket transaction costs, including the expenses and compensation of the Exchange Agent and costs associated with calculating and distributing the respective cash amounts payable to the applicable former holders of Shares, incurred in connection with such sales of Excess Merger Parent Stock.  Until the proceeds of such sales have been distributed to the former holders of Shares to whom fractional shares of Parent Stock otherwise would have been issued in the Offer, the Exchange Agent will hold such proceeds in trust for such former holders.  As soon as practicable after the determination of the amount of cash to be paid to former holders of Shares in lieu of any fractional shares of Parent Stock, the Exchange Agent shall distribute such amounts to such former holders.

 

(f)                                     Any portion of the Exchange Fund which remains undistributed to the holders of Shares six months after the Effective Time shall be returned to Parent, upon demand, and, from and after such delivery to Parent, any holders of Shares who have not theretofore complied with this Article III shall thereafter look only to Parent for the Merger Consideration payable in respect of such Shares, any cash paid in respect of fractional shares of Parent Stock to which they are entitled pursuant to Section 3.03(e) and any dividends or other distributions with respect to Parent Stock to which they are entitled pursuant to Section 3.03(c), in each case, without any interest thereon.

 

(g)                                  Neither Parent, Merger Sub, the Surviving Corporation, the Exchange Agent nor the Company shall be liable to any holder of Shares for any such shares of Parent Stock (or dividends or distributions with respect thereto) or cash from the Exchange Fund delivered to a public official pursuant to any abandoned property, escheat or similar Law.

 

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(h)                                  If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by Surviving Corporation, the posting by such Person of a bond in such reasonable amount as Surviving Corporation may direct as indemnity against any claim that may be made against Surviving Corporation with respect to such Certificate, the Exchange Agent shall pay in exchange for such lost, stolen or destroyed Certificate the Merger Consideration payable in respect of the Shares represented by such Certificate, any cash paid in respect of fractional shares of Parent Stock to which the holders thereof are entitled pursuant to Section 3.03(e) and any dividends or other distributions to which the holders thereof are entitled pursuant to Section 3.03(c), in each case, without any interest thereon.

 

(i)                                      Parent or the Exchange Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to the Offer or this Agreement to any holder of Shares such amounts as Parent or the Exchange Agent are required to deduct and withhold under the Code, or any Tax Law, with respect to the making of such payment.  To the extent that amounts are so withheld by Parent or the Exchange Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of Shares in respect of whom such deduction and withholding was made by Parent or the Exchange Agent.

 

(j)                                      The Exchange Agent shall invest any cash included in the Exchange Fund, as directed by Parent, on a daily basis.  Any interest and other income resulting from such investments shall be paid to Parent upon termination of the Exchange Fund pursuant to Section 3.03(f).  In the event the cash in the Exchange Fund shall be insufficient to fully satisfy all of the payment obligations to be made by the Exchange Agent hereunder, Parent shall promptly deposit cash into the Exchange Fund in an amount that is equal to the deficiency in the amount of cash required to fully satisfy such payment obligations.

 

Section 3.04.                              Stock Transfer Books .  At the Effective Time, the stock transfer books of the Company shall be closed and thereafter there shall be no further registration of transfers of Shares theretofore outstanding on the records of the Company.  From and after the Effective Time, the holders of Certificates representing Shares outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such Shares except as otherwise provided herein or mandated by Law.  On or after the Effective Time, any Certificates presented to the Exchange Agent, the Surviving Corporation or Parent, for any reason, in accordance with Section 3.03(b), shall be canceled against delivery of the Merger Consideration payable in respect of the Shares formerly represented by such Certificates, any cash paid in respect of fractional shares of Parent Stock to which the holders thereof are entitled pursuant to Section 3.03(e) and any dividends or other distributions to which the holders thereof are entitled pursuant to Section 3.03(c), in each case, net of any required withholding for Tax and without any interest thereon.

 

Section 3.05.                              Company Stock Options .

 

(a)                                   Immediately prior to the Effective Time, each outstanding Company Stock Option shall become fully vested and exercisable.  At the Effective Time and without any action on the part of the parties hereto or any holder of such Company Stock Options, each then outstanding Company Stock Option shall be canceled and converted into and shall thereafter represent only the right to receive:

 

(i)                                      a payment in cash equal to (i) 45% of the Cash Merger Consideration, minus 45% of the per Share cash exercise price for such respective Shares under such Company Stock Options, multiplied by (ii) the aggregate number of Shares issuable upon exercise of such Company Stock Options; and

 

(ii)                                   a number of shares of Parent Stock equal to (i) 0.46739 multiplied by (ii) the number determined pursuant to the following formula:

 

X =	Y x (A-B)
	A

 

Where X = the number to be multiplied by 0.46739

 

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Y = the total number of Shares subject to the Company Stock Option

 

A = 0.46739 times the average closing sale prices for a share of Parent Stock over the five (5) consecutive trading days ending on and including the second full trading day prior to the Effective Time plus $37.80

 

B = the exercise price of the Shares subject to the Company Stock Option;

 

provided , however , that in lieu of any fractional shares of Parent Stock that otherwise would be issuable pursuant to this subparagraph (ii), the holder will receive an amount in cash (without interest) equal to such holder’s respective proportionate interest in the proceeds from the sale or sales in the open market by the Exchange Agent for the Offer, on behalf of all such holders, of the aggregate fractional shares of Parent Stock otherwise issuable pursuant to this subparagraph (ii).

 

(b)                                  The amount of cash and number of shares of Parent Stock to which the optionee otherwise would be entitled pursuant to subparagraphs (a) and (b) above shall be reduced by the total amount of withholding for applicable Taxes with respect to the aggregate Company Stock Options canceled and converted into the right to receive cash and Parent Stock pursuant to this Section 3.05.  Such amounts for withholding shall first be deducted from the amounts otherwise payable pursuant to subparagraph (a) and, to the extent additional withholding is required, the number of shares of Parent Stock otherwise deliverable pursuant to subparagraph (b) will be reduced by the amount of remaining withholding, based on the value of a share of Parent Stock over the five (5) consecutive trading days ending on and including the second full trading day prior to the Effective Time.

 

(c)                                   Parent shall cause Merger Sub to make all such payments as promptly as practicable, and in any event within fifteen (15) Business Days, after the Effective Time.  As promptly as practicable after the date hereof, the Company shall (x) effect any amendments to the Company Stock Plans or any instruments granting or defining the rights of holders of Company Stock Options, (y) obtain any necessary consents or approvals of the applicable holders of such Company Stock Options, and (z) take any other actions as may be permitted or required under the terms of the Company Stock Plans, any instruments granting or defining the rights of holders of such Company Stock Options, or applicable Law, necessary to effectuate this Section 3.05.  Prior to the Effective Time, the Company shall provide notice to each holder of a Company Stock Option outstanding under the Company Stock Plans describing the accelerated vesting and cash out of such Company Stock Options in accordance with this Section 3.05.

 

Section 3.06.                              Employee Stock Purchase Plan .  The Company shall take all requisite action with respect to the Company’s 2000 Employee Stock Purchase Plan, as amended (the “ Company ESPP ” ), to ensure that (i) all outstanding Company Purchase Rights (as defined in Section 4.02) will be exercised no later than three (3) Business Days prior to the Expiration Date, (ii) no Company Purchase Rights will be issued and outstanding as of the Expiration Date, (iii) conditioned upon the occurrence of the Closing, the Company ESPP will be terminated no later than the Effective Time, and (iv)  no additional offering periods shall commence on or after the Expiration Date.  The Company shall deliver to Parent prior to the Expiration Date sufficient evidence that the Company ESPP will be terminated as of the Effective Time, conditioned upon the occurrence of the Closing.  In addition, prior to the Effective Time, the Company shall take all actions (including, if appropriate, amending the terms of the Company ESPP and the terms of any offering period(s) commencing prior to the Expiration Date) that are necessary to provide that, as of the Effective Time, participants and former participants in the Company ESPP shall cease to have any right or interest thereunder.  Notwithstanding the foregoing, all actions taken and all amendments made pursuant to this Section 3.06 shall be taken or made in compliance with Sections 423 and 424 of the Code and so as not to result in a “modification” under such Sections.  All Shares issued in connection with the exercise of the Company Purchase Rights shall be, at the Effective Time, converted into the right to receive the Merger Consideration in accordance with, and pursuant to, the terms and conditions of this Agreement.

 

Section 3.07.                              Restricted Stock .  Pursuant to the terms of the Company’s Restricted Stock Plan, all outstanding rights that the Company may hold immediately prior to the Effective Time to acquire unvested Shares issued pursuant to the Company Restricted Stock Plan (the “ Repurchase Rights ” ) shall lapse at the Effective Time.

 

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ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

The Company represents and warrants to Parent that except as set forth in the disclosure letter dated as of the date hereof delivered by the Company to Parent (the “ Company Disclosure Letter ” ):

 

Section 4.01.                              Organization and Qualification .  The Company is a corporation duly organized and validly existing under the laws of the State of Delaware and has the requisite corporate power and authority to own, lease, license and operate its assets and properties and to carry on its business as it is now being conducted.  The Company is qualified to transact business and, where applicable, is in good standing in each jurisdiction in which the properties owned, leased, licensed or operated by it or the nature of the business conducted by it makes such qualification necessary, except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.  True, accurate and complete copies of the certificate of incorporation and bylaws of the Company, in each case, as amended and in effect on the date hereof, including all amendments thereto, have heretofore been filed with the SEC or delivered to Parent.

 

Section 4.02.                              Capitalization .

 

(a)                                   The authorized capital stock of the Company consists of 100,000,000 Shares and 1,000,000 shares of preferred stock, par value $0.01 per share ( “ Company Preferred Stock ” ).  As of December 13, 2005, (i) 36,901,028 Shares, including in each case the associated Company Rights, were issued and outstanding, (ii) no shares of Company Preferred Stock were issued or outstanding, (iii) no Shares were held in the treasury of the Company, (iv) 1,057,342 Shares were reserved for issuance upon exercise of Company Stock Options issued and outstanding, (v) 1,116,660 Shares were authorized and reserved for future issuance pursuant to the Company Stock Plans (other than Shares authorized and reserved for future issuance upon exercise of Company Stock Options issued and outstanding) and the Company ESPP, (vi) 253,950 shares of Company Restricted Stock were issued and outstanding and 46,050 shares of Company Restricted Stock were reserved and available for issuance under the Company Restricted Stock Plan, and (vii) 25,000 shares of Company Preferred Stock were designated as Series A Junior Preferred Stock, par value $0.01 per share, and were reserved for issuance upon exercise of the Company Rights issued pursuant to the Company Rights Agreement.  The Company has delivered or made available to Parent a complete and correct copy of the Company Rights Agreement as in effect on the date hereof.  Each issued and outstanding share of capital stock of the Company is, and each Share reserved for issuance as specified above will be, upon issuance on the terms and conditions specified in the instruments pursuant to which it is issuable, duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights.  Since December 13, 2005 through the date hereof, except as permitted by this Agreement, (i) no Shares have been issued, except in connection with the exercise of purchase rights issued in accordance with the terms of the Company ESPP ( “ Company Purchase Rights ” ) or Company Stock Options issued and outstanding on December 13, 2005 and (ii) no options, warrants, securities convertible into, or commitments with respect to the issuance of, shares of capital stock of the Company have been issued, granted or made, except Company Rights in accordance with the terms of the Company Rights Agreement.

 

(b)                                  Except for Company Rights, Company Purchase Rights and Company Stock Options issued and outstanding, as of the date hereof, there are no outstanding subscriptions, options, calls, contracts, commitments, understandings, restrictions, arrangements, rights or warrants, including any right of conversion or exchange under any outstanding security, instrument or other agreement and also including any rights plan or other anti-takeover agreement, obligating the Company or any Subsidiary of the Company to issue, deliver or sell, or cause to be issued, delivered or sold, additional Shares or obligating the Company or any Subsidiary of the Company to grant, extend or enter into any such agreement or commitment.  As of the date hereof, there are no obligations, contingent or otherwise, of the Company or its Subsidiaries to (i) repurchase, redeem or otherwise acquire any Shares or the capital stock or other equity interests of any Subsidiary of the Company or (ii) provide material funds to, or make any material investment in (in the form of a loan, capital contribution or otherwise), or provide any guarantee with respect to the obligations of, any Person other than a Company Subsidiary.  There are no outstanding stock appreciation rights or similar derivative securities or rights of the Company or any of its Subsidiaries.  There are no bonds, debentures, notes or other indebtedness of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which stockholders

 

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of the Company may vote.  There are no voting trusts, irrevocable proxies or other agreements or understandings to which the Company or any Subsidiary of the Company is a party or is bound with respect to the voting of any Shares.  The Rights Plan Amendment has been executed and is in full force and effect, and the Company Board has otherwise taken all action such that, for so long as this Agreement is in full force and effect, (i) none of Merger Sub or Parent and its Subsidiaries shall become an “Acquiring Person” and no “Shares Acquisition Date” shall occur under the Company Rights Agreement as a result of the execution, delivery and performance of this Agreement and the consummation of the Offer, the Merger or the Second Merger, (ii) no “Distribution Date” shall occur as a result of the announcement of or the execution of this Agreement, the commencement or completion of the Offer, the Merger or the Second Merger, and (iii) the Company Rights Agreement shall terminate immediately prior to the acceptance of Shares for purchase or exchange by Merger Sub pursuant to the Offer.  As used in this Section 4.02(b), the terms “Acquiring Person,” “Distribution Date” and “Shares Acquisition Date” shall have the meanings ascribed to such terms in the Company Rights Agreement.  The Company has not agreed to register any securities under the Securities Act or under any state securities law or granted registration rights to any Person (except rights which have terminated or expired). Neither the Company nor any of its Subsidiaries has any outstanding obligations in respect of prior acquisitions of businesses to pay, in the form of securities, cash or other property, any portion of the consideration payable to the seller or sellers in such transaction.

 

(c)                                   The Company has previously made available to Parent complete and correct copies of each Company Stock Plan and the Company ESPP.  Section 4.02(c) of the Company Disclosure Letter sets forth a complete and correct list as of December 13, 2005, of (i) all holders of outstanding Company Stock Options, whether or not granted under the Company Stock Plans, including the date of grant, the number of Shares subject to each such option, the exercise price per Share, the exercise and vesting schedule, the number of Shares remaining subject to each such option, and the maximum term of each such option, (ii) all holders of outstanding shares of Company Restricted Stock, including the number and kind of shares subject to the Repurchase Rights, the grant date of such shares, the purchase price per share at which the Company may repurchase the Company Restricted Stock, and the period during which each Repurchase Right may be exercised, and (iii) the number of Shares remaining available for purchase under the Company ESPP.  Complete and correct copies of the relevant forms of written agreements, including forms of amendments thereto, evidencing the grant of Company Stock Options or Company Restricted Stock and the grant of purchase rights pursuant to the Company ESPP have been provided to Parent by the Company.

 

Section 4.03.                              Subsidiaries .  Each Subsidiary of the Company is duly organized, validly existing and, where applicable, in good standing under the laws of its jurisdiction of organization and has the requisite power and authority to own, lease, license and operate its assets and properties and to carry on its business as it is now being conducted, and each Subsidiary of the Company is qualified to transact business, and is in good standing, in each jurisdiction in which the properties owned, leased, licensed or operated by it or the nature of the business conducted by it makes such qualification necessary, except in all cases as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.  All of the outstanding shares of capital stock or other equity interests of each Subsidiary of the Company are validly issued, fully paid, nonassessable and free of preemptive rights and are owned directly or indirectly by the Company.  There are no subscriptions, options, warrants, voting trusts, proxies or other commitments, understandings, restrictions or arrangements relating to the issuance, sale, voting or transfer of any shares of capital stock or other equity interests of any Subsidiary of the Company, including any right of conversion or exchange under any outstanding security, instrument or agreement.  The Company has no material investment in any entity other than its Subsidiaries.

 

Section 4.04.                              Authority; Non-Contravention; Approvals .

 

(a)                                   The Company has all necessary power and authority to execute and deliver this Agreement, to perform its obligations hereunder and, subject to obtaining the Company Stockholder Approval, to consummate the Merger and the other transactions contemplated by this Agreement.  The execution, delivery and performance by the Company of this Agreement, and the consummation by the Company of the Merger and the other transactions contemplated by this Agreement, have been duly authorized by all necessary corporate action on the part of the Company, and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the Merger or the other transactions contemplated by this Agreement (other than obtaining the Company Stockholder Approval and the filing and recordation of the Certificate of Merger as required by the DGCL).  This Agreement has been duly executed and delivered by the Company and, assuming the due

 

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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 as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws relating to or affecting the rights and remedies of creditors generally and the effect of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).  If required by the DGCL, the affirmative vote of the holders of a majority of the outstanding Shares entitled to vote at a duly called and held meeting of the Company’s stockholders will be the only vote of the holders of capital stock of the Company necessary to approve and adopt this Agreement and the Merger (the “ Company Stockholder Approval ” ).

 

(b)                                  At meetings duly called and held on December 13 and 14, 2005, the Company Board unanimously (i) determined that this Agreement and the other transactions contemplated hereby, including the Offer and the Merger, are advisable, fair to and in the best interests of the Company and the Company’s stockholders, (ii) approved and adopted this Agreement and the transactions contemplated hereby, including the Offer and the Merger and (iii) resolved to recommend approval and adoption of this Agreement and the Merger by the Company stockholders and that the Company stockholders tender their Shares pursuant to the Offer.  Such determinations, approvals, resolutions and recommendations are in effect as of the date hereof.  The actions taken by the Company Board constitute approval of the Offer, the Merger, this Agreement and the other transactions contemplated thereby and hereby by the Company Board under the provisions of Section 203 of the DGCL, such that Merger Sub and Parent becoming an “interested stockholder” as a result of the Offer is approved by the Company Board for purposes of Section 203 and the restrictions on “business combinations” as set forth in Section 203 of the DGCL do not apply to the Offer, this Agreement or the transactions contemplated thereby or hereby.  No other takeover statute or other similar statute or regulation relating to the Company is applicable to the Offer, the Merger, the Second Merger or the other transactions contemplated by this Agreement.  Without giving effect to the execution of this Agreement, neither the Company nor any affiliate or associate of the Company is, or has been during the last three (3) years, an “interested stockholder” (as defined in Section 203 of the DGCL) of Parent.

 

(c)                                   The execution, delivery and performance of this Agreement by the Company and the consummation of the Offer and the Merger and the other transactions contemplated hereby do not and will not violate, conflict with, give rise to the right to modify or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration under, or require any offer to purchase or any prepayment of any debt, or result in the creation of any Lien, security interest or encumbrance upon any of the properties or assets of the Company or any of its Subsidiaries under any of the terms, conditions or provisions of (i) the respective certificate of incorporation or bylaws or similar governing documents of the Company or any of its Subsidiaries, (ii) any statute, law, ordinance, rule, regulation, judgment, decree, order, injunction, writ, permit or license of any Governmental Entity applicable to the Company or any of its Subsidiaries or any of their respective properties or assets, subject in the case of consummation, to obtaining the Company Required Statutory Approvals and the Company Stockholder Approval, or (iii) any Company Permit or Contract to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries or any of their respective properties or assets may be bound or affected, other than, in the case of (ii) and (iii) above, such violations, conflicts, rights to modify, breaches, defaults, terminations, accelerations or creations of Liens, security interests or encumbrances that would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

 

(d)                                  Except for (i) the filings by the Company required by the HSR Act, (ii) the filings by the Company required by Antitrust Laws of foreign jurisdictions, (iii) the applicable requirements of the Exchange Act, (iv) the filing of the Certificate of Merger and (v) any required filings under the rules and regulations of the NASDAQ National Market (the filings and approvals referred to in clauses (i) through (v) collectively, the “ Company Required Statutory Approvals ” ), no declaration, filing or registration with, or notice to, or authorization, consent or approval of, any Governmental Entity is necessary for the execution and delivery of this Agreement by the Company or the consummation by the Company of the Merger or the other transactions contemplated hereby, other than such declarations, filings, registrations, notices, authorizations, consents or approvals which, if not made or obtained, as the case may be, would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

 

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Section 4.05.                              Reports and Financial Statements .

 

(a)                                   Since January 1, 2001, the Company has filed with the SEC all material forms, registration statements, prospectuses, reports, schedules and documents (including all exhibits, post-effective amendments and supplements thereto) (the “ Company SEC Documents ” ) required to be filed by it under each of the Securities Act and the Exchange Act, all of which, as amended if applicable, complied in all material respects as to form with all applicable requirements of the appropriate Act, SOX and the rules and regulations thereunder.  As of their respective dates (taking into account any amendments or supplements filed prior to the date hereof), the Company SEC Documents 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 therein, in the light of the circumstances under which they were made, not misleading.  As of the date hereof, there are no outstanding unresolved issues with respect to the Company or the Company SEC Documents noted in comment letters or other correspondence received by the Company or its attorneys from the SEC.

 

(b)                                  Each of the principal executive officer of the Company and the principal financial officer of the Company (or each former principal executive officer of the Company and each former principal financial officer of the Company, as applicable) has made all certifications required by Rule 13a-14 or 15d-14 under the Exchange Act or Sections 302 and 906 of SOX and the rules and regulations of the SEC promulgated thereunder with respect to the Company SEC Documents, and to the knowledge of the Company, the statements contained in such certifications are true and correct.  For purposes of this Section 4.05(b), “principal executive officer” and “principal financial officer” shall have the meanings given to such terms in SOX.  Neither the Company nor any of its Subsidiaries has outstanding, or has arranged any outstanding, “extensions of credit” to directors or executive officers within the meaning of Section 402 of SOX.

 

(c)                                   The consolidated financial statements of the Company included in the Company SEC Documents comply as to form, 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, have been prepared in accordance with GAAP (except, in the case of unaudited statements, as permitted by Form 10-Q or 8-K or the applicable rules of the SEC) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments which are not material).  The books and records of the Company and its Subsidiaries are maintained in all material respects in accordance with GAAP and any other applicable legal and accounting requirements.

 

(d)                                  Neither the Company nor any of its Subsidiaries is a party to, or has any commitment to become a party to, any joint venture, off-balance sheet partnership or any similar contract or arrangement (including any contract or arrangement relating to any transaction or relationship between or among the Company and any of its Subsidiaries, on the one hand, and any unconsolidated Affiliate, including any structured finance, special purpose or limited purpose entity or Person, on the other hand or any “off-balance sheet arrangements” (as defined in Item 303(a) of Regulation S-K of the SEC)), where the result, purpose or intended effect of such contract or arrangement is to avoid disclosure of any material transaction involving, or material Liabilities of, the Company or any of its Subsidiaries in the Company’s or such Subsidiary’s published financial statements or other of the Company SEC Documents.

 

(e)                                   The Company maintains a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

 

(f)                                     The Company has in place the “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) required in order for the Chief Executive Officer and Chief Financial Officer of the Company to engage in the review and evaluation process mandated by the Exchange Act and the rules promulgated thereunder.  The Company’s “disclosure controls and procedures” are reasonably designed to ensure

 

20

 

that all information (both financial and non-financial) required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that all such information is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding required disclosure and to make the certifications of the Chief Executive Officer and Chief Financial Officer of the Company required under the Exchange Act with respect to such reports.

 

(g)                                  Since December 31, 2000, the Company has not received from its independent auditors any oral or written notification of a (x) “reportable condition” or (y) “material weakness” in the Company’s internal controls, as such terms are defined in the Statements of Auditing Standards 60, as in effect on the date hereof.  In addition, based on the results of the Company’s ongoing evaluation of its internal control over financial reporting, the Company is not aware of any “material weakness”, or “significant deficiency” which individually or in the aggregate could result in a “material weakness,” as such terms are defined Auditing Standard No. 2 of the Public Company Accounting Oversight Board, as in effect on the date hereof.

 

Section 4.06.                              Absence of Undisclosed Liabilities .  Except as disclosed in the audited financial statements included in the Company’s Form 10-K for the year ended December 31, 2004 (the “ Company 10-K ” ) or the unaudited financial statements included in the Company’s Form 10-Q for the period ended September 30, 2005 (the “ Company 10-Q ” ), neither the Company nor any of its Subsidiaries has as of the date hereof any material Liabilities, except Liabilities: (a) which were incurred after September 30, 2005 in the ordinary course of business consistent with past practice and which would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, or (b) which are of a nature not required to be reflected in the consolidated financial statements of the Company and its Subsidiaries prepared in accordance with GAAP consistently applied.

 

Section 4.07.                              Litigation .  Except as disclosed in the Company SEC Documents prior to the date hereof, as of the date hereof, there are no Actions pending, or, to the knowledge of the Company, threatened in writing against, which relate to or affect the Company or any of its Subsidiaries, before any court or other Governmental Entity or any arbitrator that would, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.  As of the date hereof, neither the Company nor any of its Subsidiaries is subject to any judgment, decree, injunction, rule or order of any Governmental Entity or any arbitrator which would, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.  There has not, within the last four (4) years, been nor, as of the date hereof, are there any internal investigations or inquiries being conducted by the Company, the Company Board (or any committee thereof) or any other Person at the request of any of the foregoing concerning any financial, accounting, Tax, conflict of interest, self-dealing, fraudulent or deceptive conduct or other misfeasance or malfeasance issues.

 

Section 4.08.                              Absence of Certain Changes or Events .

 

(a)                                   Except as disclosed in the Company SEC Documents prior to the date hereof, since September 30, 2005:

 

(i)                                      the Company and its Subsidiaries have conducted their business only in the ordinary course consistent with past practice;

 

(ii)                                   there has not been any split, combination or reclassification of any of the Company’s capital stock or any declaration, setting aside or payment of any dividend on, or other distribution (whether in cash, stock or property) in respect of, in lieu of, or in substitution for, shares of the Company’s capital stock;

 

(iii)                                except as required by a change in GAAP, there has not been any change in accounting methods, principles or practices by the Company materially affecting the consolidated financial position or results of operations of the Company;

 

(iv)                               the Company and its Subsidiaries have not made any material Tax election or settled or compromised any material Tax liability or refund, other than Tax elections required by Law, or

 

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changed any annual Tax accounting period or method of Tax accounting, filed any material amendment to a Tax Return, entered into any closing agreement relating to any material Tax, surrendered any right to claim a material Tax refund, or consented to any extension or waiver of the statute of limitations period applicable to any material Tax claim or assessment; and

 

(v)                                  no action has been taken by the Company or its Subsidiaries to amend or waive any performance or vesting criteria or accelerate vesting, exercisability or funding under any Company Benefit Plan or Company Stock Option.

 

(b)                                  Since September 30, 2005, there has not occurred any circumstance or event, or series of circumstances or events, which, individually or in the aggregate, has had or would reasonably be expected to have a Company Material Adverse Effect.

 

Section 4.09.                              Compliance with Applicable Law; Permits .

 

(a)                                   The Company, its Subsidiaries and their employees hold all authorizations, permits, licenses, certificates, easements, concessions, franchises, variances, exemptions, orders, consents, registrations, approvals and clearances of all Governmental Entities (including, without limitation, all those that may be required by the FDA or any other Governmental Entity engaged in the regulation of the Company’s products) which are required for the Company and its Subsidiaries to own, lease, license and operate its properties and other assets and to carry on their respective business in the manner described in the Company SEC Documents filed prior to the date hereof and as they are being conducted as of the date hereof (the “ Company Permits ” ), and all the Company Permits are valid, and in full force and effect, except where the failure to have, or the suspension or cancellation of, or the failure to be valid or in full force and effect of, any such Company Permits would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

 

(b)                                  The Company and its Subsidiaries are, and have been at all times since January 1, 2001, in compliance with the terms of the Company Permits and all applicable Laws relating to the Company and its Subsidiaries or their respective businesses, assets or properties, except where the failure to be in compliance with the terms of the Company Permits or such applicable Law would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.  Since January 1, 2001, neither the Company nor any of its Subsidiaries has received any notification from any Governmental Entity (i) asserting that the Company or any of its Subsidiaries is not in material compliance with, or at any time since such date has failed to materially comply with, applicable Law or (ii) threatening to revoke any material Company Permit.  As of the date hereof, no material investigation or review by any Governmental Entity is pending or, to the knowledge of the Company, has been threatened against the Company or any of its Subsidiaries.

 

Section 4.10.                              Company Material Contracts; Defaults .

 

(a)                                   As of the date hereof and except as filed as exhibits to the Company’s SEC Documents prior to the date hereof, neither the Company nor any of its Subsidiaries is a party to, and none of their respective assets, businesses or operations is bound by, any Contract (whether written or oral) that (i) is a “material contract” (as such term is defined in Item 601(a)(10) of Regulation S-K promulgated under the Securities Act); (ii) relates to any indebtedness in excess of $500,000; (iii) provides for aggregate payments from it or any of its Subsidiaries in excess of $500,000, has an unexpired term exceeding six months, cannot be terminated without penalty upon not more than sixty (60) days’ prior written notice, and which has yet-to-be performed executory obligations; (iv) materially limits its freedom or the freedom of any of its Subsidiaries to compete in any line of business or with any Person or in any geographical area or which would so materially limit its freedom or the freedom of any of Parent or its Subsidiaries (including the Surviving Corporation) so to compete after the Effective Time; (v) relates to the research, development, distribution, supply, license, co-promotion or manufacturing by other Persons of Company Key Products which Contract, if terminated or non-renewed, would reasonably be expected to have a material adverse effect on any Company Key Product; (vi) that relates to a Company Key Product and purports to prohibit the Company or any Subsidiary from contesting the validity or ownership of any other Person’s patent or from challenging the inventorship of any other Person’s invention; (vii) which relates to a Company Key Product and where, in settlement of an actual or threatened action for patent infringement, trade secrets misappropriation or similar intellectual property action, the Company or any Subsidiary purports to acknowledge or agree that certain

 

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acts infringe or misappropriate the rights of another Person; (viii) where, in settlement of an actual or threatened action for patent infringement, trade secret misappropriation or similar intellectual property action, another Person agrees in writing not to contest the validity or ownership of Company Owned Intellectual Property which relates to a Company Key Product; (ix) relating to the right of the Company or any Subsidiary to use the name [“McGhan”]; or (x) to the extent not included within the foregoing, each Company Material License (collectively, the “ Company Material Contracts ” ).  Except for Company Material Contracts which expire pursuant to their terms after the date hereof, each of the Company Material Contracts is valid and binding on the Company or its Subsidiary party thereto and, to the Company’s knowledge, each other Person party thereto, and is in full force and effect and enforceable against the Company or such Subsidiary, as the case may be, in accordance with its terms (except as enforcement may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting creditors’ rights or by general equity principles and (ii) to the extent applicable, securities laws limitations on the enforceability of provisions regarding indemnification in connection with the sale or issuance of securities).

 

(b)                                  Neither the Company nor any of its Subsidiaries is in violation, breach or default under any of the Company Material Contracts, and there has not occurred any event that, with the lapse of time or the giving of notice or both, would constitute such a violation, breach or default, except for such breaches or defaults that would not, individually or in the aggregate, reasonably be expected to result in a Company Material Adverse Effect.  No other Person has alleged or claimed that the Company or any of its Subsidiaries or, to the Company’s knowledge, any sublicensee of the Company or any of its Subsidiaries, is in violation, breach or default under any Company Material Contract, except for such breaches or defaults that would not, individually or in the aggregate, reasonably be expected to result in a Company Material Adverse Effect.  To the knowledge of the Company and its Subsidiaries, no other party to a Company Material Contract is in violation, breach or default under any of the Company Material Contracts, and there has not occurred any event that, with the lapse of time or the giving of notice or both, would constitute such a violation, breach or default, except for such breaches or defaults that would not, individually or in the aggregate, reasonably be expected to result in a Company Material Adverse Effect.

 

Section 4.11.                              Taxes .

 

(a)                                   Each of the Company and its Subsidiaries has (i) duly and timely filed with the appropriate Tax authority all Tax Returns required to be filed by it through the date hereof, and all such Tax Returns are true, correct and complete in all respects and (ii) paid all Taxes due and owing (whether or not shown due on any Tax Returns), except in each case where the failure to pay such Taxes or the failure of such Tax Returns to be true, correct or complete in all respects would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.   Neither the Company nor any of its Subsidiaries currently is the beneficiary of any extension of time within which to file any material Tax Return.  No written claim has ever been made by a Tax authority in a jurisdiction where the Company and its Subsidiaries do not file Tax Returns that the Company or any of its Subsidiaries is or may be subject to taxation by that jurisdiction.

 

(b)                                  The unpaid Taxes of the Company and its Subsidiaries did not, as of the date of the financial statements contained in the most recent Company SEC Filings, exceed the reserve for Tax liability (excluding any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the balance sheets (rather than in any notes thereto) contained in such financial statements.  Since the date of the financial statements in the most recent Company SEC Filings filed prior to the date hereof, neither the Company nor any of its Subsidiaries has incurred any liability for Taxes outside the ordinary course of business or otherwise inconsistent with past custom and practice, except for any liability for Taxes which would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

 

(c)                                   There are no Liens for Taxes upon any property or asset of the Company or any Subsidiary thereof, except for Liens (i) for current Taxes the payment of which is not yet delinquent, or for Taxes contested in good faith and reserved against in accordance with GAAP and reflected in the Company SEC Reports filed prior to the date hereof or (ii) that would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

 

(d)                                  No deficiencies for Taxes with respect to any of the Company and its Subsidiaries have been set forth or claimed in writing, or proposed or assessed by a Tax authority.  There are no pending or, to the

 

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knowledge of the Company, proposed or threatened audits, investigations, disputes or claims or other actions for or relating to any Liability for Taxes with respect to any of the Company and its Subsidiaries, and there are no matters under discussion with any Tax authority, or known to the Company, with respect to Taxes that are likely to result in a material additional Liability for Taxes with respect to any of the Company and its Subsidiaries.  No issues relating to Taxes of the Company or its Subsidiaries were raised by the relevant Tax authority in any completed audit or examination that would reasonably be expected to recur with a Company Material Adverse Effect on Taxes in a later taxable period.  The Company has delivered or made available to Parent true and complete copies of federal, state and local income Tax Returns of each of the Company and its Subsidiaries and their predecessors for the years ended December 31, 2001, 2002, 2003 and 2004, and true and complete copies of all examination reports and statements of deficiencies assessed against or agreed to by any of the Company and its Subsidiaries or any predecessor, with respect to Taxes.  None of the Company, any of its Subsidiaries or any predecessor has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency, or has made any request in writing for any such extension or waiver.

 

(e)                                   Each of the Company and its Subsidiaries has withheld and paid all material Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party, and all Tax Returns (including without limitation all IRS Forms W-2 and 1099) required with respect thereto have been properly completed and timely filed in all material respects.  Neither the Company nor any of its Subsidiaries has classified any individual as an “independent contractor” or similar non-employee status who, according to any Company Benefit Plan or applicable Law, should have been classified as an employee, except to the extent that the failure to do so, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect.

 

(f)                                     There are no Tax sharing agreements or similar arrangements (including indemnity arrangements) with respect to or involving any of the Company and its Subsidiaries, and, after the Closing Date, none of the Company and its Subsidiaries shall be bound by any such Tax sharing agreements or similar arrangements or have any Liability thereunder for amounts due in respect of periods prior to the Closing Date.

 

(g)                                  Except for the affiliated group of which the Company is the common parent, each of the Company and its Subsidiaries is not and has never been a member of an affiliated group of corporations within the meaning of Section 1504 of the Code or any group that has filed a combined, consolidated or unitary Tax Return.  Neither the Company nor any of its Subsidiaries has Liability for the Taxes of any Person (including an individual, corporation, general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union or other entity or Governmental Entity) other than the Company and its Subsidiaries (i) under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local or foreign law), (ii) as a transferee or successor, (iii) by contract, or (iv) otherwise.

 

(h)                                  The Company has not constituted either a “distributing corporation” or a “controlled corporation” in a distribution of stock qualifying for tax-free treatment under Section 355 of the Code (i) in the two (2) years prior to the date of this Agreement, or (ii) in a distribution which could otherwise constitute part of a “plan” or “series of related transactions” (within the meaning of Section 355(e) of the Code) that includes the Offer, the Merger and the Second Merger.

 

(i)                                      Neither the Company nor any of its Subsidiaries has taken any action or knows of any fact that could be reasonably expected to prevent the Merger, taken together with the Offer and the Second Merger, from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code.

 

(j)                                      Neither the Company nor any of its Subsidiaries has been a party to a “reportable transaction,” as such term is defined in Treasury Regulations Section 1.6011-4(b)(1) (other than such transactions that have been properly reported) or to a transaction that is or is substantially similar to a “listed transaction,” as such term is defined in Treasury Regulations Section 1.6011-4(b)(2), or any other transaction requiring disclosure under analogous provisions of state, local or foreign Tax law.  The Company has disclosed on its federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of Code Section 6662.

 

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Section 4.12.                              Employee Benefit Plans; ERISA .

 

(a)                                   Section 4.12(a) of the Company Disclosure Letter includes a complete list, as of the date hereof, of each material employee benefit plan, program or policy providing benefits to any current or former employee, officer or director of the Company or any of its Subsidiaries or any beneficiary or dependent thereof that is sponsored or maintained by the Company or any of its Subsidiaries or to which the Company or any of its Subsidiaries contributes or is obligated to contribute, or with respect to which the Company or any of its Subsidiaries has or may have any Liability, including any employee welfare benefit plan within the meaning of Section 3(1) of ERISA or any employee pension benefit plan within the meaning of Section 3(2) of ERISA (whether or not such plan is subject to ERISA) and any material bonus, incentive, deferred compensation, vacation, stock purchase, stock option, severance, employment, change of control or fringe benefit or similar arrangement, agreement, plan, program or policy (collectively, the “ Company Benefit Plans ” ).  The Company has made available to Parent a copy of each of the Company Benefit Plans, including any amendments thereto, and where applicable, any related trust agreement, annuity or insurance contract, the most recent actuarial valuation, the most recent summary plan description, the most recent prospectus, the most recent IRS determination letter, and the most recent annual report (Form 5500) and audited financial statements.

 

(b)                                  Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect: (i) the Company and its Subsidiaries have complied, and are now in compliance, with all provisions of all laws and regulations applicable to Company Benefit Plans and each Company Benefit Plan has been administered in accordance with its terms, including the making of all required contributions and the reflection by the Company of all required accruals on its financial statements; (ii) no event or condition exists which would reasonably be expected to subject the Company or any of its Subsidiaries to Liability in connection with the Company Benefit Plans or any plan, program, or policy sponsored or contributed to by any of their respective ERISA Affiliates other than the provision of benefits thereunder in the ordinary course; and (iii) there are no pending or, to the Company’s knowledge, threatened Actions (other than claims for benefits in the ordinary course) relating to Company Benefit Plans which have been asserted or instituted and which would reasonably be expected to result in any Liability of the Company or any of its Subsidiaries.

 

(c)                                   In no event will the execution and delivery of this Agreement or any other related agreement, the consummation of the transactions contemplated hereby or thereby (including, without limitation, the Offer), or the Company Stockholder Approval (either alone or in conjunction with any other event, such as termination of employment) result in, cause the accelerated vesting, exercisability, funding or delivery of, or increase the amount or value of, any material payment or benefit to any current or former employee, officer or director of the Company or any of its Subsidiaries or any beneficiary or dependent thereof or result in a limitation on the right of the Company or any of its Subsidiaries to amend, merge, terminate or receive a reversion of assets from any Company Benefit Plan or related trust.

 

(d)                                  Section 4.12(d) of the Company Disclosure Letter identifies each Company Benefit Plan that is intended to be a “qualified plan” within the meaning of Section 401(a) of the Code or is intended to be similarly qualified or registered under applicable foreign law (collectively, the “ Company Qualified Plans ” ). Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, the IRS (or other relevant foreign regulatory agency) has issued a favorable determination letter (or similar approval under foreign law) with respect to each Company Qualified Plan and the related trust that has not been revoked, and the Company knows of no existing circumstances or events that have occurred that would reasonably be expected to adversely affect the qualified status of any Company Qualified Plan or the related trust, which cannot be cured without a Company Material Adverse Effect.

 

(e)                                   No Company Benefit Plan or Company ERISA Affiliate Plan is, or has ever been, subject to Title IV or Section 302 of ERISA or Section 412 or 4971 of the Code.

 

(f)                                     No Company Benefit Plan or Company ERISA Affiliate Plan is, or has ever been, a Multiemployer Plan.

 

(g)                                  There is no contract, agreement, plan or arrangement to which the Company or any Subsidiary of the Company is a party, including but not limited to the provisions of this Agreement, that,

 

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individually or collectively, could give rise to the payment of any material amount that would not be deductible pursuant to Section 162(m) of the Code.

 

(h)                                  No amount that could be received (whether in cash or property or the vesting of property), as a result of the execution and delivery of this Agreement or any other related agreement, the consummation of the transactions contemplated hereby or thereby, or the stockholder approval of the Merger (either alone or in conjunction with any other event, such as termination of employment), by any employee, officer or director of the Company or any Subsidiary of the Company who is a “disqualified individual” (as such term is defined in Treasury Regulation Section 1.280G–1) under any Company Benefit Plan or otherwise could be characterized as a “parachute payment” (as defined in Section 280G(b)(2) of the Code).  The Company has made available to Parent all necessary information to determine, as of the date hereof, the estimated maximum amount that could be paid to each disqualified individual in connection with the transactions contemplated by this Agreement under all employment, severance and termination agreements, other compensation arrangements and Company Benefit Plans currently in effect, assuming that the individual’s employment with the Company is terminated immediately after the Effective Time.  The Company has also provided to Parent (i) the grant dates, exercise prices and vesting schedules applicable to each Company Option granted to the individual; (ii) the grant dates and vesting schedules applicable to each grant of Company Restricted Stock; (iii) the “base amount” (as defined in Section 280G(b)(e) of the Code) for each such individual as of the date of this Agreement; and (iv) the maximum additional amount that the Company has an obligation to pay to each disqualified individual to reimburse the disqualified individual for any excise tax imposed under Section 4999 of the Code with respect to the disqualified individual’s excess parachute payments (including any taxes, interest or penalties imposed with respect to the excise tax).

 

Section 4.13.                              Labor and Other Employment Matters .

 

(a)                                   Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, (i) no work stoppage, slowdown, lockout, labor strike, material arbitration or other material labor dispute against the Company or any of its Subsidiaries by employees is pending or threatened, (ii) neither the Company nor any of its Subsidiaries is delinquent in payments to any of its employees for any wages, salaries, commissions, bonuses or other direct compensation for any services performed for it or amounts required to be reimbursed to such employees, (iii) the Company and each of its Subsidiaries are in compliance with all applicable Laws respecting labor, employment, fair employment practices, terms and conditions of employment, immigration, workers’ compensation, occupational safety, plant closings, and wage and hours, (iv) the