AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

 

AGREEMENT AND PLAN OF MERGER

 

by and among

 

TELEDYNE TECHNOLOGIES INCORPORATED

 

BOAT MERGER SUB INC.

 

and

 

BENTHOS, INC.

 

November 1, 2005

 

Execution Version

TABLE OF CONTENTS

 

 

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TABLE OF CONTENTS

(continued)

 

 

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TABLE OF CONTENTS

(continued)

 

 

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AGREEMENT AND PLAN OF MERGER

 

This AGREEMENT AND PLAN OF MERGER (this “ Agreement ”), dated as of November 1, 2005, is by and among TELEDYNE TECHNOLOGIES INCORPORATED , a Delaware corporation (“ Parent ”), BOAT MERGER SUB INC ., a Massachusetts corporation and a wholly-owned subsidiary of Parent (“ Merger Sub ”), and BENTHOS, INC ., a Massachusetts corporation (the “ Company ”).

 

WHEREAS , the Board of Directors of Parent, the Board of Directors of Merger Sub, and the Board of Directors of the Company have each adopted this Agreement and have approved and determined that it is advisable and in the best interests of their respective companies and shareholders to consummate the merger of Merger Sub with and into the Company (the “ Merger ”), with the Company as the surviving corporation in the Merger, upon and subject to the terms and conditions set forth in this Agreement, pursuant to which the shares of common stock, $0.06 2/3 par value, of the Company (the “ Shares ” or the “ Company Common Stock ”) issued and outstanding immediately prior to the Effective Time (as defined in Section 1.2 ), other than shares described in Section 2.1(b) and other than Dissenting Shares (as defined in Section 2.3(b) ), will be converted into the right to receive $17.50 per Share in cash (the “ Merger Consideration ”);

 

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

 

WHEREAS , concurrently with the execution and delivery of this Agreement and as a condition to Parent’s and Merger Sub’s willingness to enter into this Agreement, Parent and Merger Sub have entered into a Shareholders’ Agreement, dated the date hereof, the form of which is attached as Exhibit A hereto (the “ Shareholders’ Agreement ”), with the shareholders of the Company named therein (the “ Shareholders ”), pursuant to which each Shareholder has, among other things, agreed to vote certain Shares beneficially owned by the Shareholder in favor of the Merger and this Agreement and against any Takeover Proposal (as defined in Section 5.2(f) ), in each case subject to and on the conditions set forth therein.

 

NOW, THEREFORE , in consideration of the foregoing and the respective representations, warranties, covenants, and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows:

 

ARTICLE I

THE MERGER

 

Section 1.1 The Merger . Subject to the terms and conditions of this Agreement and the provisions of the Massachusetts Business Corporation Act, as amended (the “ MBCA ”), at the Effective Time, the Company and Merger Sub shall consummate the Merger pursuant to which:

 

(a) Merger Sub shall be merged with and into the Company and the separate corporate existence of Merger Sub shall thereupon cease;

(b) the Company shall be the successor or surviving corporation in the Merger (the “ Surviving Corporation ”) under the name “Teledyne Benthos, Inc.” and shall continue to be governed by the laws of the Commonwealth of Massachusetts; and

 

(c) the separate corporate existence of the Company, with all its rights, privileges, immunities, powers, and franchises, shall continue unaffected by the Merger.

 

From and after the Effective Time, (x) the amended and restated articles of organization of the Company (the “ Company Charter ”), as in effect immediately prior to the Effective Time or as they may be amended by the Articles of Merger (as defined in Section 1.2 ), shall be the articles of organization of the Surviving Corporation until thereafter amended as provided by law and the Company Charter and (y) the amended and restated by-laws of Merger Sub (the “ Merger Sub By-laws ”), as in effect immediately prior to the Effective Time, shall be the by-laws of the Surviving Corporation until thereafter amended as provided by law, by the articles of organization of the Surviving Corporation, and by the by-laws of the Surviving Corporation. The Merger shall have the effects set forth in Section 11.07 of the MBCA.

 

Section 1.2 Effective Time . Parent, Merger Sub, and the Company shall cause appropriate articles of merger meeting the requirements of Section 11.02(c) of the MBCA (the “ Articles of Merger ”) to be executed and filed on the Closing Date (as defined in Section 1.3 ) (or on such other date as Parent and the Company may agree) with the Secretary of State of the Commonwealth of Massachusetts (the “ Secretary of State ”) as provided in the MBCA. The Merger shall become effective at the time when the Articles of Merger have been duly filed with the Secretary of State pursuant to Section 1.23(a)(2) of the MBCA or such later time as shall be agreed upon by the parties hereto and set forth in the Articles of Merger in accordance with the MBCA (such time of effectiveness, the “ Effective Time ”).

 

Section 1.3 Closing . The closing of the Merger (the “ Closing ”) shall take place at 10:00 a.m., Boston local time, on a date to be specified by the parties hereto which shall be as soon as practicable, but in no event later than the fourth business day after satisfaction or waiver of all of the conditions set forth in Article VI hereof (the “ Closing Date ”), at or directed from the offices of Davis, Malm & D’Agostine, P.C., One Boston Place, Boston Massachusetts 02108, unless another date or place is agreed to in writing by the parties hereto.

 

Section 1.4 Directors and Officers of the Surviving Corporation . The directors of Merger Sub and those individuals designated by Parent on or prior to the Closing Date shall, from and after the Effective Time, be the directors and officers, respectively, of the Surviving Corporation until their successors shall have been duly elected or appointed or qualified or until their earlier death, resignation, or removal in accordance with the Surviving Corporation’s articles of incorporation and by-laws.

 

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Section 1.5 Shareholders’ Meeting; Proxy Statement .

 

(a) Subject to the Company’s rights under Section 7.1(c)(ii) , the Company, acting through its Board of Directors, shall, in accordance with applicable law:

 

(i) duly call, give notice of, convene, and hold a special meeting of its shareholders for the purpose of considering and taking action upon this Agreement (the “ Special Meeting ”) as soon as practicable following the date hereof;

 

(ii) use best efforts to prepare and file with the United States Securities and Exchange Commission (the “ SEC ”), within ten (10) business days after the date hereof, a preliminary proxy statement relating to the Merger and this Agreement and use its reasonable best efforts (A) to obtain and furnish the information required to be included by the federal securities laws (and the rules and regulations thereunder) in the Proxy Statement (as hereinafter defined) and, after consultation with Parent, to respond promptly to any comments made by the SEC with respect to such preliminary proxy statement and, as soon as practicable thereafter, to cause a definitive proxy statement (the “ Proxy Statement ”) to be mailed to its shareholders and (B) to obtain the necessary approvals of the Merger and this Agreement by its shareholders as soon as practicable (including by retaining an outside proxy solicitation firm at its own cost and expense); and

 

(iii) include in the Proxy Statement (A) the recommendation of the Board of Directors that shareholders of the Company vote in favor of the approval of the Merger and the approval of this Agreement, unless such recommendation has been withdrawn, or unless such recommendation has been modified or amended, in each case in accordance with Section 5.2 , and (B) the opinion of Ferris, Baker Watts Incorporated (the “Financial Advisor”) described in Section 3.21 (if the Financial Advisor authorizes such inclusion, which authorization the Company will request).

 

(b) Parent shall provide the Company with the information concerning Parent and Merger Sub required to be included in the Proxy Statement. Parent shall vote, or cause to be voted, all of the Shares (if any) then owned by it, Merger Sub, or any of its other Subsidiaries (as defined in Section 3.1(c) ) or Affiliates (as defined in Section 8.10 ) in favor of the approval of the Merger and the approval of this Agreement.

 

ARTICLE II

CONVERSION OF SECURITIES

 

Section 2.1 Conversion of Capital Stock . As of the Effective Time, by virtue of the Merger and without any action on the part of the holders of any shares of the Company Common Stock or of the common shares, $0.06 2/3 par value, of Merger Sub (the “ Merger Sub Common Stock ”):

 

(a) Merger Sub Common Stock . Each issued and outstanding share of Merger Sub Common Stock shall be converted into and become one validly issued, fully paid and nonassessable share of the common stock, $0.06 2/3 par value, of the Surviving Corporation.

 

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(b) Cancellation of Treasury Stock and Parent-Owned Stock . All shares of Company Common Stock that are owned by the Company as treasury stock, all shares of Company Common Stock owned by any Subsidiary of the Company and any shares of Company Common Stock owned by Parent, Merger Sub or any other wholly-owned Subsidiary of Parent shall be canceled and retired and shall cease to exist and no consideration shall be delivered in exchange therefor.

 

(c) Conversion of Shares . Each issued and outstanding share of Company Common Stock, other than Shares to be canceled in accordance with Section 2.1(b) and Dissenting Shares, shall be converted into the right to receive the Merger Consideration in cash, without interest, payable to the holder thereof upon surrender of the certificate formerly representing such share of Company Common Stock in the manner provided in Section 2.2 . All such shares of Company Common Stock, when so converted, shall no longer be outstanding and shall automatically be canceled 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 the Merger Consideration therefor upon the surrender of such certificate in accordance with Section 2.2 , without interest.

 

Section 2.2 Exchange of Certificates .

 

(a) Paying Agent . Prior to the Effective Time, Parent shall designate a bank or trust company (the “ Paying Agent ”) reasonably acceptable to the Company to make the payments of the funds to which holders of shares of Company Common Stock shall become entitled pursuant to Section 2.1(c) and to which holders of Company Stock Options (as defined in Section 2.4 ) shall become entitled pursuant to Section 2.4 . When and as needed, Parent shall deposit with the Paying Agent such funds in trust for the benefit of holders of shares of Company Common Stock for exchange in accordance with Section 2.1 , and for the benefit of holders of Company Stock Options in accordance with Section 2.4 , for timely payment hereunder. Such funds shall be invested by the Paying Agent as directed by Parent; provided that such investments shall be in obligations of or guaranteed by the United States of America and backed by the full faith and credit of the United States of America or in commercial paper obligations rated A-1 or P-1 or better by Moody’s Investors Service, Inc. or Standard & Poor’s, respectively. Any net profit resulting from, or interest or income produced by, such investments will be payable to Parent.

 

(b) Exchange Procedures . As promptly as practicable after the Effective Time, but in no event more than ten (10) days thereafter, Parent shall cause the Paying Agent to mail to each holder of record of a certificate or certificates that, immediately prior to the Effective Time, represented outstanding shares of Company

 

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Common Stock (the “ Certificates ”) whose shares were converted pursuant to Section 2.1(c) into the right to receive the Merger Consideration:

 

(i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Paying Agent and shall be in such form and have such other provisions as Parent and the Surviving Corporation may reasonably specify); and

 

(ii) instructions for use in effecting the surrender of the Certificates in exchange for payment of the Merger Consideration.

 

Upon surrender of a Certificate for cancellation to the Paying Agent, together with such letter of transmittal, duly executed by the holder of such Certificate, the holder of such Certificate shall be entitled to receive in exchange therefor the Merger Consideration (subject to Section 2.2(d) and Section 2.2(e) ) multiplied by the number of shares of Company Common Stock formerly represented by such Certificate and the Certificate so surrendered shall forthwith be canceled. If payment of the Merger Consideration is to be made to an individual, corporation, limited liability company, or other entity (a “ Person ”) other than the Person in whose name the surrendered Certificate is registered, it shall be a condition of payment that the Certificate so surrendered shall be properly endorsed or shall be otherwise in proper form for transfer and that the Person requesting such payment shall have paid any transfer and other taxes required by reason of the payment of the Merger Consideration to a Person other than the registered holder of the Certificate surrendered or shall have established to the satisfaction of the Surviving Corporation that such tax either has been paid or is not applicable. Until surrendered as contemplated by this Section 2.2(b) , each Certificate held by a holder whose Shares were converted pursuant to Section 2.1(c) into the right to receive the Merger Consideration shall be deemed at any time after the Effective Time to represent only the right to receive the Merger Consideration in cash as contemplated by this Section 2.2 .

 

(c) Transfer Books; No Further Ownership Rights in Company Common Stock . 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 of Company Common Stock on the records of the Company. From and after the Effective Time, the holders of Certificates evidencing ownership of shares of Company Common Stock outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such Shares, except as otherwise provided for herein or by applicable law. If, after the Effective Time, Certificates are presented to the Surviving Corporation for any reason, they shall be canceled and exchanged for Merger Consideration in the proper amount of cash as provided in this Article II .

 

(d) Return of Funds; No Liability . At any time following 270 calendar days after the Effective Time, each of Parent and the Surviving Corporation shall be entitled to require the Paying Agent to deliver to it any funds (including any interest received with respect thereto) which had been deposited with the Paying Agent and

 

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which have not been disbursed to holders of Certificates or holders of Company Stock Options described in Section 2.4 , and thereafter such holders of Certificates or Company Stock Options shall be entitled to look only to Parent or the Surviving Corporation (subject to abandoned property, escheat or other similar laws) as general creditors thereof with respect to the payment of any Merger Consideration that may be payable upon surrender of any Certificates such holder holds, or the Option Termination Consideration (as defined in Section 2.4(a )) with respect to payments to a holder of a Company Stock Option to be made under Section 2.4 , all as determined pursuant to this Agreement (and, in the case of Option Termination Consideration, pursuant to the terms of the applicable Company Option Plan (as defined in Section 2.4 )), without any interest thereon. Notwithstanding the foregoing, none of Parent, the Surviving Corporation, or the Paying Agent shall be liable to any holder of a Certificate for Merger Consideration, or to any holder of a Company Stock Option for Option Termination Consideration, delivered to a public official pursuant to any applicable abandoned property, escheat, or similar law.

 

(e) Withholding Taxes . Parent, the Surviving Corporation, and the Paying Agent shall be entitled to deduct and withhold from the consideration otherwise payable to a holder of Shares pursuant to the Merger, or to a holder of a Company Stock Option pursuant to Section 2.4 , such amounts as Parent, the Surviving Corporation, or the Paying Agent is required to deduct and withhold with respect to the making of such payment under the Code (as defined in Section 3.16 ) or any provision of state, local or foreign tax law. To the extent amounts are so withheld by Parent, the Surviving Corporation, or the Paying Agent, the withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Shares or the Company Stock Options, as applicable, in respect of which the deduction and withholding was made.

 

Section 2.3 Dissenters’ Rights .

 

(a) In accordance with Sections 13.01 through 13.31 of the MBCA (the “ MBCA Dissenters’ Rights Provisions ”), dissenters’ rights may be available to holders of shares of Company Common Stock in connection with the Merger.

 

(b) Notwithstanding anything to the contrary herein, any shares of Company Common Stock held of record by Persons who, prior to the Special Meeting, have objected to the Merger and complied with all applicable provisions of the MBCA Dissenters’ Rights Provisions necessary to perfect and maintain their dissenter’s rights thereunder (any such shares of Company Common Stock, “ Dissenting Shares ”) shall not be converted as of the Effective Time into a right to receive the Merger Consideration, but instead shall entitle the holder of such shares of Company Common Stock to such rights as may be available under the MBCA Dissenters’ Rights Provisions; provided , however , that if after the Effective Time such holder fails to perfect or withdraws or otherwise loses its rights under the MBCA Dissenters’ Rights Provisions, the shares of Company Common Stock owned by such holder immediately prior to the Effective Time shall be treated as if they had been converted as of the Effective Time into the right to receive the Merger Consideration, without interest.

 

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(c) Prior to the Effective Time, the Company shall give Parent prompt notice of its receipt of each notification from a shareholder of the Company stating such shareholder’s intent to demand payment for his or her shares if the Merger is effectuated, and Parent shall have the right to participate in all negotiations and proceedings with respect to such demands. Prior to the Effective Time, the Company shall not, except with the prior written consent of Parent, make any payment with respect to, or settle, any such demands. After the Effective Time, Parent shall pay, or shall cause the Surviving Corporation to pay, any amounts that may become payable in respect of Dissenting Shares under the MBCA Dissenters’ Rights Provisions.

 

Section 2.4 Company Stock Options .

 

(a) Conversion of Company Stock Options . As of the Effective Time, each unexercised and unexpired option, whether or not vested, to purchase shares of Company Common Stock granted under any of the Company’s 1990 Employee Stock Option Plan, the Company’s 2000 Employee Stock Option Plan and/or the Company’s 1998 Director Stock Option Plan (collectively, the plans shall be referred to as the “ Company Option Plans ” and the stock options granted under the Company Option Plans shall be referred to as “ Company Stock Options ”), if any, by virtue of the Merger, shall be converted into and shall entitle the holder thereof to a right to receive, in consideration of the termination of such Company Stock Options, for each option to purchase a share of Company Common Stock an amount in cash equal to the excess, if any, of the Merger Consideration over the exercise price of such option, subject to Section 2.2(d) and (e)  hereof (the “ Option Termination Consideration ”). The Company Option Plans shall terminate as of the Effective Time.

 

(b) Exchange Procedures . Subject to the applicable terms of the Company Option Plans, as promptly as practicable after the Effective Time, but in no event more than ten (10) days thereafter, Parent shall cause the Paying Agent to mail to each holder of record of a Company Stock Option:

 

(i) a letter of transmittal (which (x) shall specify that such Company Stock Option has been terminated, effective as of the Effective Date, in consideration of the Surviving Corporation’s obligation to make the cash payments and (y) shall contain a representation by the applicable holder that he or she is the sole record and beneficial owner of all right, title, and interest in and to such Company Stock Option); and

 

(ii) instructions for claiming the Option Termination Consideration.

 

Upon delivery of such letter of transmittal, duly executed by the holder of such Company Stock Option, the holder of such Company Stock Option shall be entitled to receive in exchange therefore the Option Termination Consideration.

 

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ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

The Company represents and warrants to Parent and Merger Sub as follows:

 

Section 3.1 Corporate Organization .

 

(a) Each of the Company and each of its Subsidiaries (other than Leumas and Evets) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has the requisite corporate power and authority to own or lease all of its properties and assets and to carry on its business as it is now being conducted. Each of Leumas, LLC (“Leumas”) and Evets, LLC (“Evets”) is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Delaware and has the requisite power and authority to own or lease all of its properties and assets and to carry on its business as it is now being conducted. Each of the Company and each of its Subsidiaries is duly licensed or qualified to do business in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed or qualified would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect (as defined in Section 3.1(b) ) on the Company (a “ Company Material Adverse Effect ”). The copies of the Company Charter attached in Section 3.1(a) of the Company’s disclosure schedule delivered to Parent concurrently with the execution of this Agreement (the “ Company Disclosure Schedule ”) and the Company By-laws as most recently filed with the Company’s SEC Documents (as defined in Section 3.5(a) ), are true, complete and correct copies of such documents as in effect as of the date of this Agreement.

 

(b) As used in this Agreement, the term “ Material Adverse Effect ” means any state of facts, change, development, effect, event, occurrence, or condition that is materially adverse to (i) the business, results of operations, properties, assets, liabilities, or financial condition of the Company and its Subsidiaries taken as a whole or Parent and its Subsidiaries taken as a whole, as applicable, or (ii) a party’s or parties’ ability to consummate the transactions contemplated hereby within the timeframes contemplated by this Agreement. For purposes of analyzing whether any state of facts, change, development, effect, event, occurrence, or condition has resulted in a Company Material Adverse Effect, neither Parent nor Merger Sub will be deemed to have knowledge of any state of facts, change, development, effect, occurrence or condition relating to the Company or its Subsidiaries unless it is disclosed in the Company’s SEC Documents or the Company Disclosure Schedule.

 

(c) As used in this Agreement, the word “ Subsidiary ,” (i) when used with respect to any party hereto, means any corporation, partnership, limited liability company, or other organization, whether incorporated or unincorporated, of which (x) at least a majority of the securities or other interests having by their terms voting power to elect a majority of the board of directors or others performing similar functions with

 

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respect to such corporation or other organization or (y) the power to direct the affairs of such corporation, partnership, limited liability company, or other organization, is directly or indirectly beneficially owned or controlled by such party hereto or by any one or more of its subsidiaries, or by such party hereto and one or more of its subsidiaries, and (ii) in addition, when used with respect to the Company, Leumas and Evets.

 

Section 3.2 Capitalization .

 

(a) The authorized capital stock of the Company consists of 7,500,000 shares of Company Common Stock, $0.06 2/3 par value. At the date hereof, there are:

 

(i) 2,105,871 shares of Company Common Stock issued and outstanding (plus an additional 269,645 treasury shares),

 

(ii) 39,351 shares of Company Common Stock issuable in respect of 1990 Employee Plan Options (all of which as of the Effective Time will be fully vested in favor of their holders),

 

(iii) 199,275 shares of Company Common Stock issuable in respect of 2000 Employee Plan Options (all of which as of the Effective Time will be fully vested in favor of their holders), and

 

(iv) 118,500 shares of Company Common Stock issuable in respect of 1998 Director Plan Options (all of which as of the Effective Time will be fully vested in favor of their holders).

 

All of the issued and outstanding shares of Company Common Stock have been (and any shares of Company Common Stock issuable upon the exercise of 1990 Employee Plan Options, upon exercise of the 2000 Employee Plan Options, or upon the exercise of 1998 Director Plan Options will be) duly authorized and validly issued and are (or will be) fully paid, nonassessable, and free of preemptive rights. Section 3.2(a) of the Company Disclosure Schedule sets forth a true and complete list of all outstanding options granted under the Company Option Plans, including the expiration date of each such option, the exercise price for shares of Company Common Stock represented by each such option, the number of shares of Company Common Stock for which each such option is exercisable, and the number of holders of such options. Except as set forth in Section 3.2(a) of the Company Disclosure Schedule, as of the date hereof, there are not and, as of the Effective Time there will not be, any shares of Company Common Stock or other capital stock issued and outstanding or any subscriptions, options, warrants, calls, stock appreciation rights, phantom stock units, commitments, or agreements of any character providing for the purchase or issuance of any securities of the Company, including any securities representing the right to purchase or otherwise receive any Company Common Stock.

 

(b) Except as set forth in Section 3.2(b) of the Company Disclosure Schedule, the Company owns, directly or indirectly, all of the issued and outstanding shares of capital stock or its ownership units in the case of a limited liability company of

 

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each of its Subsidiaries, free and clear of any liens, charges, encumbrances, adverse rights or claims and security interests whatsoever (“ Liens ”), and all of such shares and ownership units are duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights. None of the Company’s Subsidiaries has or is bound by any outstanding subscriptions, options, warrants, calls, commitments or agreements of any character calling for the purchase or issuance of any security of such Subsidiary, including any securities representing the right to purchase or otherwise receive any shares of capital stock or any other equity security or interest of such Subsidiary.

 

(c) Disclosed in Section 3.2(c) of the Company Disclosure Schedule is a true and complete list of all 1990 Employee Plan Options, 2000 Employee Plan Options and 1998 Director Plan Options outstanding as of the date hereof, the exercise price therefor, and the holder thereof.

 

(d) The Board of Directors of the Company has not declared any dividend or distribution with respect to the Company Common Stock the record or payment date for which is on or after the date of this Agreement.

 

(e) As of the date hereof, (i) no bonds, debentures, notes or other indebtedness of the Company having the right to vote are issued or outstanding, and (ii) there are no outstanding contractual obligations of Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of Company Common Stock or any shares of capital stock or other equity security or interest of any Subsidiary or of the Company.

 

(f) The Company Common Stock is quoted on The Nasdaq Capital Market (“ Nasdaq ”). No other securities of Company or any of its Subsidiaries are listed or quoted for trading on any United States domestic or foreign securities exchange.

 

Section 3.3 Authority .

 

(a) The Company has all necessary corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby, subject to obtaining the approval of holders of at least a two-thirds majority of the outstanding shares of Company Common Stock (the “ Company Shareholder Approval ”) prior to the consummation of the Merger in accordance with the MBCA. The Company Shareholder Approval is the only vote of the holders of any class or series of the Company’s securities necessary to adopt this Agreement and approve the Merger and the other transactions contemplated hereby. The execution, delivery and performance by the Company of this Agreement, and the consummation by it of the transactions contemplated hereby, have been duly authorized by its Board of Directors and, except for obtaining the Company Shareholder Approval as contemplated by Section 1.5 and as required by the MBCA, no other corporate action on the part of the Company is necessary to authorize the execution and delivery by the Company of this Agreement and the consummation by it of the transactions contemplated hereby. This Agreement has been duly executed and delivered by the Company and, assuming due and valid

 

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authorization, execution and delivery of this Agreement by the other parties hereto, constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except that such enforceability (i) may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting or relating to the enforcement of creditors’ rights generally and (ii) is subject to general principles of equity.

 

(b) The Board of Directors of the Company has adopted this Agreement and has approved and taken all corporate action required to be taken by the Board of Directors for the consummation by the Company of the Merger and the other transactions contemplated by this Agreement.

 

Section 3.4 Consents and Approvals; No Violations .

 

(a) Except for (i) the consents and approvals set forth in Section 3.4(a) of the Company Disclosure Schedule, (ii) the filing with the SEC of the preliminary proxy statement and the Proxy Statement, (iii) the filing of the Articles of Merger with the Secretary of State pursuant to the MBCA, (iv) the approval of this Agreement by the requisite vote of the shareholders of the Company, and (v) filings, permits, authorizations, consents and approvals as may be required under, and other applicable requirements of, (A) the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and (B) any filings required under the rules and regulations of Nasdaq, no consents or approvals of, or filings, declarations or registrations with, any federal, state, or local court, administrative or regulatory agency or commission, or other governmental authority or instrumentality, domestic or foreign (each, a “ Governmental Entity ”) are necessary for the consummation by the Company of the transactions contemplated hereby or by the Shareholders’ Agreement, other than such other consents, approvals, filings, declarations or registrations that, if not obtained, made or given, would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

 

(b) Except as set forth in Section 3.4(b) of the Company Disclosure Schedule, neither the execution and delivery of this Agreement by the Company nor the consummation by the Company of the transactions contemplated hereby, nor compliance by the Company with any of the terms or provisions hereof, nor the consummation of the transactions contemplated by the Shareholders’ Agreement or compliance with the terms and provisions thereof will:

 

(i) conflict with or violate any provision of the Company Charter or Company By-laws or any of the similar organizational documents of any of its Subsidiaries or

 

(ii) assuming that the authorizations, consents and approvals referred to in Section 3.4(a) and the authorization hereof by the Company’s shareholders in accordance with the MBCA are duly obtained, (A) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree, or injunction applicable to the Company or any of its Subsidiaries or any of their

 

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respective properties or assets, or (B) subject to obtaining the third-party consents set forth in Section 3.4(b) of the Company Disclosure Schedule, violate, conflict with, result in the loss of any material benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any Lien upon any of the respective properties or assets of the Company or any of its Subsidiaries under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which the Company or any of its Subsidiaries is a party, or by which they or any of their respective properties or assets may be bound or affected, except, in the case of clause (B) above, for such violations, conflicts, breaches, defaults, losses, terminations of rights thereof, accelerations or Lien creations which, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect.

 

Section 3.5 SEC Documents; Undisclosed Liabilities .

 

(a) The Company has filed all required reports, schedules, forms and registration statements with the SEC since September 30, 2001 (collectively, and in each case including all exhibits, schedules, and amendments thereto and documents incorporated by reference therein, the “ SEC Documents ”). As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Securities Act of 1933, as amended (the “ Securities Act ”), or the Exchange Act, as the case may be, and the rules and regulations of the SEC promulgated thereunder applicable to such SEC Documents, and none of the SEC Documents (including any and all financial statements included therein) as of such dates contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The Company has previously delivered (except to the extent such filings are publicly available on the EDGAR system) to Parent each registration statement, report, proxy statement or information statement (other than preliminary materials) filed by Company with the SEC since September 30, 2001, each in the form (including exhibits and any amendments thereto) filed with the SEC prior to the date hereof.

 

(b) The consolidated financial statements of the Company included in the SEC Documents (the “ SEC Financial Statements ”) comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles (“ GAAP ”) (except, in the case of unaudited consolidated quarterly statements, as permitted by Form 10-QSB of the SEC) applied on a consistent basis during the periods involved (except as may be indicated otherwise in the notes thereto) and fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended

 

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(subject, in the case of unaudited quarterly statements, to normal year-end audit adjustments). Except as set forth on Section 3.5 (b) of the Company Disclosure Schedules, since September 30, 2001, the Company has not received notice from the SEC or any other Governmental Entity that any of its accounting policies or practices are the subject of any review, inquiry, investigation or challenge other than comments from the SEC on Company filings which comments have either been satisfied or withdrawn by the SEC.

 

(c) Since September 30, 2004, neither the Company nor any of its consolidated Subsidiaries has incurred any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise and whether due or to become due) except (i) as and to the extent set forth on the audited balance sheet of the Company and its consolidated Subsidiaries as of September 30, 2004 (including the notes thereto) included in the SEC Documents, (ii) as incurred after September 30, 2004 in the ordinary course of business and consistent with past practice, (iii) as described in the Company’s quarterly report on Form 10-QSB filed on August 17, 2005 (the “ Recent SEC Documents ”), or (iv) as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. The Company has not been a party to any securitization transactions or “off-balance sheet arrangements” (as defined in Item 303 of Regulation S-K of the Exchange Act) at any time since September 30, 2001.

 

(d) The Company has not filed any report with the SEC, Nasdaq, or any other securities regulatory authority or any securities exchange or other self regulatory authority that, as of the date of this Agreement, remains confidential.

 

(e) The principal executive officer of Company and the principal financial officer of Company (and each former principal executive officer or principal financial officer of Company) have made the certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 (the “ Sarbanes-Oxley Act ”), and the rules and regulations of the SEC promulgated thereunder with respect to the SEC Documents filed since such certifications have been required and such filings are true and correct. For purposes of the preceding sentence, “principal executive officer” and “principal financial officer” shall have the meanings given to such terms in the Sarbanes-Oxley Act.

 

(f) The Company has implemented and maintains disclosure controls and procedures required by Rule 13a-15 or 15d-15 under the Exchange Act and Section 404 of the Sarbanes-Oxley Act which (i) are effective to ensure that all material information concerning the Company and its Subsidiaries is made known on a timely basis to the individuals responsible for the preparation of Company’s filings with the SEC and other public disclosure documents; and (ii) ensures that material information is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding required disclosure. The Company has disclosed, based on its most recent evaluation of such disclosure controls and procedures prior to the date hereof, to the Company’s auditors and the audit committee of the Board of the Company (x) any significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting that are reasonably likely to adversely affect in any

 

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material respect the Company’s ability to record, process, summarize and report financial information and (y) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting.

 

Section 3.6 Broker’s Fees . Except for the Financial Advisor’s fee, which is set forth in Section 3.6 of the Company Disclosure Schedule, neither the Company nor any Subsidiary of the Company nor any of their respective officers or directors on behalf of the Company or such Subsidiaries has employed any financial advisor, broker or finder or incurred any liability for any financial advisory fee, broker’s fees, commissions, or finder’s fees in connection with any of the transactions contemplated hereby.

 

Section 3.7 Absence of Certain Changes or Events . Except as set forth in the Recent SEC Documents or in Section 3.7 of the Company Disclosure Schedule, since September 30, 2004, the Company and its Subsidiaries have conducted their businesses in all material respects in the ordinary course and in a manner consistent with past practice and, since such date, there has not been any event that, individually or in the aggregate, has had or would reasonably be expected to have, a Company Material Adverse Effect. Since September 30, 2004, neither the Company nor any of its Subsidiaries has taken, or failed to take, any action that would have constituted a breach of Section 5.1 had the covenants therein applied since that date.

 

Section 3.8 Legal Proceedings .

 

(a) Except as set forth in Section 3.8 of the Company Disclosure Schedule or as disclosed in the Recent SEC Documents, there is no action, suit or proceeding, claim, arbitration or investigation pending or, to the Company’s knowledge, threatened against the Company or any of its Subsidiaries, and neither the Company nor any of its Subsidiaries is a party to any action, suit or proceeding, arbitration or investigation, that, individually or in the aggregate, could reasonably be expected to have a Company Material Adverse Effect, restrict the conduct of the business of the Company or any of its Subsidiaries, or restrict the ability of the Company or any of its Subsidiaries to compete freely with any other Person.

 

(b) Except as set forth in Section 3.8 of the Company Disclosure Schedule or as disclosed in the Recent SEC Documents, there is no injunction, order, judgment, decree or regulatory restriction imposed upon the Company, any of its Subsidiaries or the assets of the Company or any of its Subsidiaries that, when aggregated with all other such injunctions, orders, judgments, decrees and restrictions, could reasonably be expected to have a Company Material Adverse Effect.

 

(c) There are no actions, suits, investigations, or proceedings pending as of the date of this Agreement against Company or any Subsidiary of Company, or any director, officer or employee of Company or any Subsidiary of Company, alleging any violation of federal or state securities laws, the MBCA, or the rules or regulations of Nasdaq.

 

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Section 3.9 Compliance with Applicable Law .

 

(a) Except as disclosed in Section 3.9(a) of the Company Disclosure Schedule or in the Recent SEC Documents, the Company and each of its Subsidiaries hold all material licenses, franchises, permits and authorizations necessary for the lawful conduct of their respective businesses as presently conducted and are in compliance with the terms thereof, except where the failure to hold such license, franchise, permit or authorization or such noncompliance could not, when aggregated with all other such failures or noncompliance, reasonably be expected to have a Company Material Adverse Effect.

 

(b) Except as set forth in the Recent SEC Documents or in Section 3.9(b) of the Company Disclosure Schedule, (i) the businesses of the Company and its Subsidiaries are not being conducted in violation of any law, statute, order, rule, regulation, policy and/or guideline of any Governmental Entity (including but not limited to the Sarbanes-Oxley Act and the USA PATRIOT Act of 2001), except for possible violations which, individually or in the aggregate, do not have, and would not reasonably be expected to have, a Company Material Adverse Effect and (ii) neither the Company nor any of its Subsidiaries has received notice of any material violations of any applicable law, statute, order, rule, regulation, policy and/or guideline of any Governmental Entity relating to the Company or any of its Subsidiaries.

 

Section 3.10 Company Information . The information relating to the Company and its Subsidiaries to be provided by the Company for inclusion in the preliminary proxy statement relating to the Merger and this Agreement, in the Proxy Statement, or in any other document filed with any other Governmental Entity in connection herewith, at the respective times filed with the SEC or such other Governmental Entity and first published, sent or given to shareholders of the Company and, in addition, in the case of the Proxy Statement, at the date it or any amendment or supplement thereto is mailed to holders of the shares of Company Common Stock and at the time of the Special Meeting, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances in which they are made, not misleading (except that no representation or warranty is made by the Company as to such portions thereof that relate only to Parent, Merger Sub, or any of their Subsidiaries or to statements made therein based on information supplied by or on behalf of Parent or Merger Sub for inclusion or incorporation by reference therein). The Proxy Statement will comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder.

 

Section 3.11 Employee Matters .

 

(a) The Company has delivered or made available to Parent full and complete copies or descriptions of each material employment, severance, bonus, change-in-control, profit sharing, compensation, termination, stock option, stock appreciation right, restricted stock, phantom stock, performance unit, forward purchase or sale, derivative contract, pension, retirement, deferred compensation, welfare or other employee benefit agreement, trust fund or other employee benefit arrangement and any

 

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union, guild, or collective bargaining agreement maintained or contributed to or required to be contributed to by the Company or any of its ERISA Affiliates (as defined below), for the benefit or welfare of any director, officer, employee or former employee of the Company or any of its ERISA Affiliates (such plans and arrangements being collectively the “ Company Benefit Plans ”). Except as set forth in Section 3.11(a) of the Company Disclosure Schedule, each of the Company Benefit Plans is in compliance with all applicable laws including the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”), and the Code except where such noncompliance would not reasonably be expected to have a Company Material Adverse Effect. Except as set forth in Section 3.11(a) of the Company Disclosure Schedule, the Internal Revenue Service has determined that each Company Benefit Plan that is intended to be a qualified plan under Section 401(a) of the Code is so qualified and the Company is aware of no event occurring after the date of such determination that would adversely affect such determination, except where such event would not reasonably be expected to have a Company Material Adverse Effect. Except as set forth in Section 3.11(a) of the Company Disclosure Schedule, no condition exists that is reasonably likely to subject the Company or any of its Subsidiaries to any direct or indirect liability under Title IV of ERISA or Section 4976 of the Code that would reasonably be expected to have a Company Material Adverse Effect and that is not reflected on the balance sheet contained in the Recent SEC Documents or that is reasonably likely to result in any loss of a federal tax deduction under Section 280G of the Code. Except as set forth in Section 3.11(a) of the Company Disclosure Schedule, there are no pending or, to the Company’s knowledge, threatened, claims by, on behalf of or against any of the Company Benefit Plans or any trusts related thereto except where such claims would not reasonably be expected to have a Company Material Adverse Effect. “ ERISA Affiliate ” means, with respect to any Person, any trade or business, whether or not incorporated, that together with such Person would be deemed a “single employer” within the meaning of Section 4001(a)(15) of ERISA.

 

(b) Neither the Company nor any of its Subsidiaries is a party to, or bound by, any collective bargaining agreement (other than as set forth in Section 3.11(b) of the Company Disclosure Schedule) or other contract or understanding with a labor union or labor organization. Except for such matters that would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, there is no (i) unfair labor practice, labor dispute or labor arbitration proceeding pending, (ii) to the knowledge of the Company, any activity or proceeding by a labor union or representative thereof to organize any employees of the Company or any of its Subsidiaries, or (iii) lockout, strike, slowdown, work stoppage or, to the knowledge of the Company, threat thereof by or with respect to such employees.

 

(c) No Company Benefit Plan is subject to Title IV of ERISA or Section 412 of the Code, and no Company Benefit Plan is a multiemployer plan within the meaning of Section 414(f) of the Code or a plan described in Section 413(c) of the Code.

 

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(d) There have been no prohibited transactions within the meaning of Section 406 or Section 407 of ERISA or Section 4975 of the Code with respect to any of the Company Benefit Plans, and there has been no other event, or more than one other event, with respect to any Company Benefit Plan that could result in any liability for the Company or any Subsidiary related to any excise Taxes under the Code or to any liabilities under ERISA which could have a Material Adverse Effect on Company.

 

(e) Each Company Benefit Plan has been maintained and administered in substantial compliance with its terms and with the requirements prescribed by any and all statutes, orders, rules and regulations, including but not limited to ERISA and the Code, which are applicable to such Company Benefit Plan or to the Company or any Subsidiary as a sponsor, a plan administrator or a fiduciary of such Company Benefit Plan. If a former Company Benefit Plan has been terminated by or all or any part of the liabilities of the Company or any Subsidiary for any current or former Company Benefit Plan has been transferred to another employer, such termination or transfer was properly effected and neither Company nor any of its Subsidiaries has any further liability with respect to such termination or transfer.

 

(f) Except as set forth in Section 3.11(f) of the Company Disclosure Schedule, neither the requisite corporate or stockholder approval of, nor the consummation of, the transactions contemplated by this Agreement will (either alone or together with any other event, including any termination of employment) entitle any current or former officer, employee, director or other independent contractor of the Company or a Subsidiary to any change in control payment or benefit, transaction bonus or similar benefit or severance pay or accelerate the time of payment or vesting or trigger any payment or funding (through a grantor trust or otherwise) of compensation or benefits under, increase the amount payable or trigger any other material obligation pursuant to, any Company Benefit Plan.

 

(g) Except as set forth in Section 3.11(g) of the Company Disclosure Schedule, neither the Company nor any Subsidiary has any material liability in respect of post-retirement health, medical or life insurance benefits for any current or former officer, employee, director, or independent contractor except as required to avoid excise Tax under Section 4980B of the Code.

 

(h) All contributions and other payment due from the Company or any Subsidiary with respect to each Company Benefit Plan have been made or paid in full, and all of the assets which have been set aside in a trust, escrow account or insurance company separate account to satisfy any obligations under any Company Benefit Plan are shown on the books and records of each such trust or account at their current fair market value as of the most recent valuation date for such trust or account, and the fair market value of all such assets as of each such valuation date equals or exceeds the present value of any obligation under any Company Plan.

 

(i) There are no pending or, to the knowledge of the Company or a Subsidiary, threatened claims with respect to a Company Benefit Plan (other than routine

 

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and reasonable claims for benefits made in the ordinary course of the plan’s operations) or with respect to the terms and conditions of employment or termination of employment of any current or former officer, employee or independent contractor of the Company or a Subsidiary, which claims could reasonably be expected